The Russian ministry of finance has initiated the move to tax digital asset miners to overcome the challenges the country’s central bank and law enforcement agencies created. This move comes almost a year since the ministry attempted to control the activities in the crypto mining sector following calls to legalize crypto mining.
Another Attempt At Taxation
Industry players and energy firms have urged Moscow to legalize crypto mining to allow them to use surplus gas to mint cryptocurrencies. Following its previous move, the finance ministry has been upset by the actions of the Russian central bank and law enforcement agencies.
The latter’s reason for not allowing mining is that they want miners to sell off their coins to overseas digital asset exchanges to prevent such coins from circulating within the Russian economy. Law enforcement agencies fear allowing crypto mining in the country would pave the way for money laundering.
However, the finance ministry’s solution to these fears is to issue tax codes to miners in the country. According to the ministry’s spokesperson, levying a tax on profits from crypto mining is a fair move.
A legislative reform of the tax code implies that the central bank and parliament must approve the new move. The ministry explains that the existing code has all the required provisions to include crypto miners.
Also read:Meanwhile, the expected form of taxation is yet to be revealed. Still, the ministry stated that it would contain some aspect of the framework from the previous draft bill on cryptocurrency mining.
What To Expect
In Russia, crypto mining is neither legal nor illegal but is yet to be classified as a business activity and, therefore, cannot be taxed. According to a local media outlet quoting Anatoly Aksakov, the chair of Russia’s Duma financial markets committee, the draft law is currently under discussion.
Aksakov opined that the proposed tax might be a one-off income tax between 7.5% and 15%. In addition, he proposed a fixed-rate mining with a profit tax of 20% in place of the former.
According to Oleg Ogienko, the head of government relations at the crypto mining firm, BitRiver, mining income should be determined by the state based on the sales made from crypto assets.
Alternatively, miners should be allowed to subtract expenses like electricity fees before paying taxes. He cautioned the government against adopting a high tax rate because that would deter investors and startups from moving into the crypto mining sector and less tax revenue for the government.
Since the outbreak of the conflict between Russia and Ukraine last February, the Russian government has been considering making wholesale changes to its digital asset ecosystem. Following its ban from the international payment platform, SWIFT, analysts expect the country to bypass the sanction by officially adopting crypto.
However, Russia is currently exploring using digital tokens as payment for its cross-border trading with partners. Meanwhile, the country is yet to pass a comprehensive crypto bill to allow the use of virtual assets for transactions.
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