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Comment by DennisP | Hacker News Reader

I doubt their scheme for dodging taxes would be effective. You sold your bitcoin for $15,500 to B? Ok, show me where it went into your bank account. You didn't make a $10,000 gain when you sold a coin for $25K? Ok, where did this extra $10K in your bank account come from?

On top of that, for Bitcoin itself the scheme would be especially clear, if you don't make good use of mixers, since it'd be the same identifiable coin moving around.

Still, if someday we're running a large part of the economy on strongly-anonymous cryptocurrencies, we could always tax things we can track more easily. There are all sorts of options, and some, like carbon taxes, would be more beneficial anyway.

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You are forgetting that capital gains tax applies to cypto-to-crypto trades. Meaning, if you buy 10 ETH with 1 BTC, then sell the 10 ETH later for 1.2 BTC, you need to pay capital gains tax on whatever the dollar value of 0.2 BTC was at the time of the trade. This is super hard for the government to track.

You are forgetting that the government doesn't need to track your capital gains, you do.

Any gains you can't prove are capital gains (or more specifically, are long-term capital gains, or collectibles gains) are treated as ordinary income.

Moreover, the government doesn't need to track your initial purchase price. You do. If you can't, you are treated as having paid $0 for the cryptos and are taxable on all gains.

> if you buy 10 ETH with 1 BTC, then sell the 10 ETH later for 1.2 BTC, you need to pay capital gains tax on whatever the dollar value of 0.2 BTC was at the time of the trade. This is super hard for the government to track.

Could you provide a source on this? It was my understanding that this was not the case. See https://www.reddit.com/r/CryptoCurrency/comments/7nzqky/2017...

This shows how invasive the income tax is. I would argue that any effective enforcement scheme for taxes on entirely digital exchanges would require banning public key cryptography.

In any case, these types of transactions are extraneous to those tax authorities tax now, so I don't see tax revenue declining as a result of these going untaxed.

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