Local reports say Venezuelan citizens are looking at up to 20% in tax for cryptocurrency payments.
Venezuelan government asking citizens to pay up
Venezuelans had just started warming up to Bitcoin when the government began to hold out its hand.
Venezuela’s National Assembly passed a new tax bill by the government aiming to collect up to 20% in taxes from cryptocurrency transactions after it finished a second discussion session last week. The bill targets taxes on “large financial transactions” conducted in currencies like Bitcoin. Local firms and individuals will have to pay between 2% and 20% for operations in foreign currencies like the US dollar or cryptocurrencies.
The bill’s goal is to incentivise the use of Venezuela’s own El Petro, an oil-backed cryptocurrency introduced in 2019.
What is El Petro?
El Petro is the country’s own cryptocurrency, launched in July 2019. The launch of El Petro followed strict US sanctions on the country’s economy. President Nicolas Maduro ordered the Bank of Venezuela to open Petro desks in all its branches. He announced that over $130 million AUD (at 2022 rates) would be allocated to the Digital Bank of Youth and Students to open one million Petro wallet accounts for Venezuela’s young people.
Why is Venezuela so keen on crypto?
Although Venezuela never tops any list for cryptocurrency adoption, the country is likely one of the most advanced when it comes to the day-to-day use of crypto. For instance, the Simón Bolívar International Airport in the country’s capital enabled cryptocurrency payments in 2021, both in Bitcoin and Petro. It also planned to introduce other cryptocurrencies in an effort to woo foreign tourists and facilitate payments in the country.
Of course, the reason for all these measures is Venezuela’s failing economy and the country’s dreadful financial situation. Its official currency called Bolivar has become virtually worthless over the last few years, putting even the worst shitcoins in the crypto space to shame. In 2019, the Bolivar’s inflation rate hit 10 million percent, although it has somewhat slowed since.
That rendered using the local currency impossible and has forced Venezuelans to look elsewhere for hard currency. Enter Bitcoin.
In 2020, over 20,000 shops and enterprises started accepting crypto to drive adoption and relieve some of the country’s economic woes. Bitcoin won over traditional foreign currencies like US dollars because not everyone has the necessary change at all times to conclude business in foreign currency. Cryptocurrencies are more efficient in a case like Venezuela’s, prompting even a Burger King in its capital Caracas to start accepting it. Although there are no official numbers as to how many businesses accept crypto, chances are the number is higher than the 25 percent, according to a Visa survey.
Venezuela may be one of the 40 countries where citizens prefer crypto over their erratic local currency, but the new tax bill could deal a severe blow to that. It remains to be seen if and how the bill can be enforced and whether Bitcoin will remain such a force in the country.