Venezuela to put 20% tax on transactions in cryptocurrency

It is being seen as a general trend that although governments across countries make cryptocurrencies legal tenders, but in process, they also levy heavy taxes.

The Government of Venezuela recently has made approval for a new tax after which transactions and payments in both cryptocurrencies and foreign currencies would be applicable for 20% tax over them. The tax has been named as a ‘large financial transaction’ approved by the national assembly of Venezuela. 

What made Venezuela Government levy tax 

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The motive behind such steps is to encourage the use of national currency which is losing its relevance. For a very long time now Venezuelan citizens have been using any currency, be it foreign currency or cryptocurrencies, other than the country’s currency Bolívar. Because of hyperinflation situations in Venezuela due to which the traditional fiat currency of the country has lost its huge value and eventually trust among people as well.

Adopting blockchain technology and following people’s interest in cryptocurrencies, the government also took some actions in the direction earlier. In 2018, the Government of Venezuela introduced its own digital currency on the lines of cryptocurrency. But the efforts did not result as they thought of and the project experienced ignorance of people continuing use of cryptocurrencies and foreign currencies.

So the recent step of the government to put a tax of 20% over the transactions in any country other than their digital currency. Although the tax regime will be applied with some conditions aligned. The nature of transactions and companies or people behind the transactions will also be considered before putting the tax. The percentage of transactions to be paid will be established by the government soon after the official publication of the law. But it has also been made clear that at first only 2.5% of tax will be imposed on the payments.

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How the steps have been taken

Various experts, inside the country as well, are seeing this step as not too much of a practical approach. A Venezuelan economist, Jose Guerra put his thoughts that the step will be a hit on the pockets of the country’s citizens who are using foreign currency and digital assets as their store of savings. He stated that earlier those alternative options have solved the common cash problem inside the country.

Some believe that people will find other approaches or even move towards illegal or black markets to make their payments possible in order to avoid the taxes.

South American Country with the largest oil reserves in the world, once was a fulfilled economy and one of the leading oil exporters. But later Governments over-dependence on oil and natural gas and in order to provide subsidies, the government overflowed the market with cash which resulted in hyperinflation. To deal with the severe situation, people in Venezuela themselves found the solution using cryptocurrencies, which are considered to be volatile, which are comparatively less in volatility in comparison with native currency due to inflation. But now governments step in to regulate that medium, which might not satisfy users and people in the country.