Indian investors dismiss MP's 50% ‘ignorant’ crypto tax demand
06:54, 13 April 2022
Local cryptocurrency investors dismissed Member of Parliament Sushil Kumar Modi’s call last week to increase the tax on crypto in India to 50%, as a result of “ignorance” and unimportance because he is not part of the Finance Ministry.
“I would be freaking out if the finance minister had made those comments. But, I’m sure the crypto industry is working very hard to dispel this ignorance and I hope the government is receptive to feedback.
“Because, nobody wants peer-to-peer money to replace the rupee,” said a Bengaluru-based blockchain entrepreneur.
Bitcoin to US dollar chart (BTC/USD)
“Some of Modi’s comments didn’t make sense. He said that nobody knows about crypto. A lot of people do. You just have to make an effort to understand it,” he added.
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No crypto ban in India
Modi (not related to the Indian prime minister) described investment in digital tokens such as BTC or ETH as akin to gambling, and called for the recently introduced 30% tax rate to be hiked to eye-watering levels. Modi, part of the ruling Bharatiya Janata Party, is a member of the upper house of parliament, called the Rajya Sabha.
While the recent tax framework came as a relief to investors concerned about a potential crypto ban in India, the entrepreneur said current levels were high enough already.
Indian tax on crypto
“The 30% tax on crypto in India is really, really steep, as this means the returns we provide to customers will have to be over and above this rate,” he told Capital.com. His startup will roll out a cryptocurrency yield platform in India in the coming months.
For now, the South Asian nation’s 30% tax on crypto profits will apply only to transactions where traders liquidate crypto holdings to Indian rupees. India’s rules are in line with Austria’s 27.5% tax on crypto gains, which the Alpine state introduced at the end of March.
Modi’s demand for a 50% tax on crypto in India is “shocking”, said Nagaraj, a computer programmer based in southern India. The region is home to numerous technology startups and blue-chip software exporters.
Return to a gold standard?
Nagaraj pointed to global geopolitical concerns as supporting the case for cryptocurrencies like bitcoin and ethereum, contrasting US President Richard Nixon’s 1971 move from the gold standard with the establishment of gold-linked payment channels linked to Russia.
“What is the underlying asset of a US dollar today?” Nagaraj asked. In 1971, the US administration under Nixon ended the dollar’s convertibility to gold.
“News from Europe shows Russia is moving towards the gold standard. If there isn’t an underlying asset for a currency like the US dollar, then why not crypto?” Nagaraj observed.
“I believe the underlying value of crypto is that it has no banks or transaction charges.”
It is crucial to separate taxation from regulation, Gauri says – Photo: ShutterstockTaxation versus regulation
Pratik Gauri, founder and chief executive, 5ire.org, a UAE-based blockchain startup, told Capital.com that it was crucial to separate taxation from regulation and cautioned against being overly critical of Modi’s statements.
His firm is developing solutions for some government-run agencies in India.
“The (Indian) government has opted to move from an outright ban to higher taxes on crypto assets, which is an improvement. All businesses move to greener pastures for better treatment.
“Rich folks taking their money to Switzerland, or Binance moving their operations to Malta can’t be considered an injustice,” says Gauri, a Climate Reality Leader trained by former US vice president Al Gore.
Crypto industry needs to explain more
“I think the crypto industry needs to do a better job explaining its utility. Calling government officials unreasonable and old-fashioned has never resolved problems.
“Lumping the taxation regulation together with an outright rejection of crypto or blockchain technology is unfair and prejudicial at best,” Gauri added.
Whatever the correct way to approach lawmakers over crypto taxes is, the market itself is important, with the Indian rupee being the fourth-largest currency by volume for conversion into bitcoin in Asia.
The Indian Department of Economic Affairs, part of the Ministry of Finance did not respond to Capital.com’s request to comment.
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