New tax proposal in Kazakhstan could force miners to flee
Kazakhstan may soon become a hostile country to cryptocurrency mining after the government proposes to increase taxes and electricity prices for miners, with mining equipment such as mining machines taxed.
Kazakhstan is cracking down on crypto mining tax
Permanent Deputy Finance Minister of Kazakhstan Marat Sultangaziyev recently show proposed to the government to increase electricity prices to 335%. If this is accepted, miners will no longer pay the flat rate of $0.0023 per kWh, but instead pay $0.01.
Sultangaziev’s proposal also includes a tax on mining machinery. According to his proposal, cryptocurrency mining devices should be taxed in the same way as slot machines. Slot machines are taxed via graphics cards at every table they operate, regardless of their mode (active or inactive).
Currently, Kazakhstan’s Value Added Tax (VAT) exempts crypto mining equipment. However, Sultangaziyev’s suggestion would suggest that they would also be taxed.
Considering the amount of crypto mining equipment required to successfully mine digital assets and the current tax proposal, Kazakhstan would immediately emerge as a very unattractive option for cryptocurrency miners.
Kazakhstan cryptocurrency mining background
Kazakhstan’s cheap and stable energy supply has made it an attractive target for crypto miners following China’s crackdown last year, citing environmental concerns.
The country is quickly establishing itself as the world’s leading contributor to the bitcoin hashrate. As of last August, it was only behind the United States.
However, political unrest increased earlier this year when allegations of corruption and the rising cost of living in Kazakhstan led the government to shut down the internet, negatively impacting businesses.
This action led to a global hashrate drop of more than 10% in a short period of time.
One of the massive bitcoin miners that has moved to Kazakhstan, mining company BIT, noted in January that it would not shut down operations in the region no matter how long the political situation lasted. But with the new proposal, it is uncertain whether they will uphold their previous decision.
Cryptocurrency tax regulations are increasing
Early indications are that 2022 could be the year when the crypto industry will be regulated on a large scale by authorities around the world.
In one report The International Monetary Fund (IMF) has stressed that cryptocurrency regulations need to be consistent around the world so policymakers can better monitor the space.
Authorities in Thailand, India and Singapore have now introduced various forms of crypto tax regulation to accommodate the growth of the industry in their jurisdictions.
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