In what has been hailed as the first in America, Ohio State Treasurer, Josh Mandel, has made it possible for companies to pay taxes using Bitcoin.
In the coming weeks, state entrepreneurs will be able to register and settle their online tax liabilities, with payments to be processed through the BitPay cryptocurrency payment service provider.
Companies will be able to pay 23 different taxes using BTC through an online portal that has been set up by the State Treasury Office. At present, people will not be able to use the service to pay private taxes.
The Treasurer of Ohio has made it clear that he will not actually keep any Bitcoins. The cryptocurrency will be immediately converted into US dollars after payments have been made to BitPay. Companies of any size can take advantage of the payment service.
Reasons for the move
The Ohio Treasurer stated that the move is to provide more options to state-owned companies and residents to interact with the state government.
Mandel was somehow a pioneer in leveraging emerging technologies in state systems and offers. In 2014, he launched OhioCheckbook.com, which put all of the Ohio state government spending information online and accessible to the public.
The move saw the state rated as the number one for government transparency, according to research by the US public interest research team.
This latest move is hoping to make the state a leader in the development and adoption of blockchain technology, as Mandel told Cointelegraph in an interview this week. Firstly, the state wants to offer tax payers more options when paying taxes:
"Secondly, projecting to the rest of the country and the world that the state of Ohio is a leader in blockchain technology." I believe that if we develop our technology economy here in Ohio, we must first be a technology leader. "
Mandel added that he was an enthusiast who has been encrypted for a few years and that this is just part of a process of inspiration for a wider adoption of cryptocurrency and blockchain technology across the country:
"Here in the United States, states are the laboratories for democracy, and I think this is a perfect example of this concept – where this idea is starting at the state level in Ohio, but the ultimate goal is to inspire the federal government to follow complete as a man. "
Longevity of the project
Mandel's mandate as Ohio treasurer will end in January 2019, but remains confident that the move will continue to function once it leaves its post.
It was reported that Mandel discussed with his elected successor, Republican representative Robert Sprague, and Mandel confirmed to Cointelegraph that he had discussed the issue:
"I talked to him, he and I are friends and allies, and I'm sure he will continue".
Launched only this week, the first phase allows Ohio companies to be able to pay taxes using cryptocurrency. But as Mandel explains, this is only the first step of some ambitious plans to accept different cryptocurrencies and offer service to individual tax payers.
"In the next phase of Ohiocrypto.com, we hope to expand the initiative to allow people to pay taxes in cryptocurrency and expand over Bitcoin to include other cryptocurrencies."
Given the project's childhood, Mandel was reluctant to speculate on a given time frame for the role of further improvement.
"As with any initiative that is brand new and ever made in America, it is important that we take it slowly and be cautious and thoughtful.We take the process slowly, and develop it and expand it on what we believe to be a prudent timeline."
Mandel also explained that the decision to convert Bitcoin directly into fiat currency was made after extensive research by his team.
"When dealing with taxpayers' money, the most important variables are the security and security of tax money." Every decision we make in the Ohio Treasury office is driven by this . "
BitPay CEO Stephen Paire told Cointelegraph that the initiative is important for companies focused on blockchains and cryptocurrencies that could effectively use the payment option:
"One of the things we do is talk to all the different companies in the blockchain and cryptocurrency sector and find out who their suppliers are, then we talk to them and make sure they get registered with BitPay, which allows companies in our industry to be able to pay the bills with the technology for which they are building the infrastructure.Of course, all these companies have to pay taxes, so it makes sense that all these companies have the possibility to pay their taxes with cryptocurrency " .
Setting a new precedent
Ohio is the first state in America to start this new payment method, but it is not the first to have tried it.
Other states in the United States have tried to approve invoices that allow them to pay taxes using cryptocurrency. However, these bills were stopped by state legislators.
In May 2018, the Arizona House of Representatives passed a law that would allow citizens to pay taxes using cryptocurrency. Despite this, the bill has not yet entered into force due to changes in the fine print.
The review required a study on the possibility of these alternative payment modules, but it was not clarified when this will be realized.
Likewise, Georgia tried to approve a bill in February that would allow cryptocurrencies to be used as a payment option for state taxes and licenses. However, the bill "died in committee", according to an update of progress on Legiscan. Illinois is also evaluating a similar law.
Despite these failures, other states in the United States have approved various invoices that have helped the adoption of cryptocurrencies and blockchain technology that bodes well for the future of adoption.
Wyoming was able to pass a series of invoices that saw cryptocurrencies classified as a new asset class in the state in March 2018.
Things could get complicated
The move has some interesting implications for companies that will try to take advantage of the new payment method.
A number of countries around the world have taxes on cryptocurrency gains and this will be something to consider for those entities that will pay taxes using Bitcoin.
As the international tax attorney Selva Ozelli has indicated to Cointelegraph, companies will have to try additional processes when they hold and use cryptocurrencies:
"Companies will have to keep track of the basics, the holding period, the price of cryptocurrencies, they will need to learn how to hedge price fluctuations between USD and cryptocurrencies, they will have to comply with FinCEN money laundering and additional laws. more sophisticated registers and treasury functions, just like multinationals – on the other hand, these improved compliance requirements will encourage blockchain companies to design systems to simplify these functions for companies that go on and fuel growth in jobs related to blockchain technology ".
Also the dott. Niklas Schmidt, partner of the law firm Wolf Theiss, has made a similar observation, especially for the companies that have kept their Bitcoin for some time:
"The payment of taxes in cryptocurrency creates an interesting problem: if a taxpayer bought, for example, Bitcoin some time ago and has an unrealized gain, in most jurisdictions, the release of a liability with an asset so appreciated will result in a Taxation of Income In other words, the payment of fees in Bitcoin could again trigger the tax. "
Another factor to consider is that companies in the state will still be subject to pay the federal tax, which can only be made with fiat currency, according to Schmidt.
A sign of things to come
This tax payment option is not completely new, but considering the impact it could have in Ohio and America, it could potentially spread to more countries.
While these moves may have failed in other US states, Ozelli believes that the success of such initiatives in other countries proves that there is interest in this option being available.
"In the United States, other states in the country have also considered accepting cryptocurrencies for taxes, but those initiatives in Arizona, Georgia and Illinois have never passed state legislatures." The Swiss municipality of Chiasso has allowed residents to pay taxes. in Bitcoin from January 2018, while the county of Seminole, in Florida, became the first county in the United States to announce the acceptance of Bitcoin to pay taxes in May 2018. "
Schmidt also told Cointelegraph that Zug, a municipality in Switzerland, also accepts tax payments in Bitcoin. With more than a few places around the world actively offering this payment option, it seems to promise well that this will become more and more common.
Cryptocurrency investment advisor Anthony Pompliano made a cunning remark in his daily newsletter, citing milestones like this as an important example of a cryptocurrency case that goes on:
"Historically, the detractors of Bitcoin have said that the digital asset can not be a currency because you can not pay taxes with it.This course is no longer true now.This is another data point that supports the legitimacy of the the most popular decentralized digital currency in the world. "
Government agencies and financial institutions are slowly seeing the value of incorporating cryptocurrencies into certain processes. Every step in this direction is positive, especially when the focus is on the current state of the markets.
Mandel hopes that his work with the Treasury will play a role in influencing other states to follow in their footsteps and eventually take hold at a national level:
"I hope that what we are doing in Ohio will inspire states across the country to allow their taxpayers to pay in cryptocurrency and, ultimately, inspire the federal government to pay federal taxes even with crypts."