Bitcoin fanatic suddenly announces!

Author: Qin Jin

The President of Argentina, Bitcoin enthusiast Milei, announced plans to eliminate taxes on Bitcoin transactions below $100,000.

In fact, since Milei took office as President of Argentina, his outspoken personality, advocacy for classical liberalism, and wise alignment with the Bitcoin audience have earned him countless applause and cheers both domestically and globally.

His speech at the Davos Forum on January 18 even garnered a thumbs-up from Musk. However, some of his outwardly impressive performances do not imply that his governance in Argentina has been smooth sailing. According to incomplete statistics, since taking office, Milei has already dismissed 50,000 government employees, lifted regulations on legal tender, and made Argentina more crypto-friendly. Today’s topic is the cancellation of taxes on Bitcoin.

The issue raised by Milei concerns previously undeclared profits, which is a form of amnesty that benefits those with holdings below $100,000 by exempting them from taxes.

"Eliminating Bitcoin taxes" is a significant positive event for the Bitcoin audience, but for Milei, it requires some compromises and concessions to be realized. Why? Milei was elected president at the end of 2023, achieving victory that is essentially only a partial success, as he won in the second round of elections while the opposition, the People's Union of Uganda, performed better in the first round. Thus, he finds himself governing in a parliament where the majority does not support him and even seeks to oppose him. Under these circumstances, governing seems quite challenging.

Currently, Milei does not hold a majority in the Argentine parliament, making the implementation of any policies he proposes quite difficult.

The following is an article translated from Cryptonomist, primarily discussing Milei's proposed tax exemption for Bitcoin and his governance challenges for readers' reference.

According to the latest report from the Argentine news site iPROup, Milei has removed the cryptocurrency tax plan from the "Comprehensive Bill." To achieve this, he inserted a clause for the compliance of digital assets into the original draft of the "Comprehensive Bill" in exchange for a one-time tax payment on previously undeclared assets.

This clause allows Argentine citizens to declare ownership of previously undeclared assets (such as cryptocurrencies) and only pay a 15% tax on assets exceeding the $100,000 threshold.

In fact, this clause creates a tax exemption opportunity for those declaring assets valued below $100,000 and a partial tax exemption opportunity for higher amounts.

Therefore, in Argentina, the current tax system will continue to apply, which will not tax individuals who only hold cryptocurrencies but will impose normal transaction taxes on any capital gains from sales.

However, the removal of cryptocurrency-related clauses from the "Comprehensive Bill" does not mean they have been completely abandoned, but rather that they can attempt to approve the clauses in other ways.

Issues in the Argentine Parliament

Milei was elected President of Argentina in November 2023 and took office in December 2023.

But his biggest problem is that he did not gain majority support in the parliament.

Milei is an independent libertarian, not affiliated with any political party, but belongs to a coalition that has only 38 members in the House of Representatives and 8 senators out of a total of over 320 representatives.

In the Argentine House of Representatives, the opposition People's Union of Uganda (UP) holds the majority with 103 seats. However, in the total of 257 seats, the government can rely on 114 supporters, including members of the ruling party and external supporters.

Since an absolute majority would require 129 seats, Milei is effectively governing without a majority in parliament.

Note that the parliament was elected on October 22, 2023, when Milei received less than 30% of the votes in the first round. Therefore, the candidate with the most votes among presidential candidates was Sergio Massa, the candidate from the People's Union of Uganda.

Thus, the election in October 2023 was a victory for the opposition People's Union of Uganda, while the election in November (the second round of the presidential election) was a victory for Milei. This complicates the new president's ability to govern.

The "Comprehensive Bill"

The "Comprehensive Bill," which includes cryptocurrency clauses, is a massive reform attempt that the Argentine parliament is not particularly fond of.
In fact, to gain approval, Milei had to make compromises, leading to the removal of some less consensual sections.

Interior Minister Guillermo Francos stated that the entire section concerning financial issues in the bill has been deleted, and the cryptocurrency clauses have effectively been postponed. This indicates that the matter will be revisited by the government and parliament in the near future.

The problem is that there are many contentious issues within the "Comprehensive Bill," causing repeated delays in its approval. Because Milei does not have a true majority in parliament, he has to negotiate.

Francos believes that removing the tax section is crucial for expediting the legal approval process.

Cryptocurrency Taxation in Argentina

In Argentina, the only cryptocurrency tax is the tax levied on capital gains from sales.

Individuals residing in Argentina must pay a 15% tax rate on profits from the sale of cryptocurrencies, while corporate profits are taxed at a progressive rate of 25% to 35%, and any dividend distributions incur an additional 7% tax.

Therefore, among countries that tax capital gains from cryptocurrencies, this rate is lower than in many other countries but remains consistent with global standards.

The issue raised by Milei concerns previously undeclared profits, which is a form of amnesty that benefits those with holdings below $100,000 by exempting them from taxes.

Future Evolution of Cryptocurrency Taxation in Argentina

It is still unclear whether Milei will genuinely support cryptocurrencies or Bitcoin in Argentina.

What is known is that he has abandoned plans to close the Argentine Central Bank and replace the Argentine peso with the dollar.

However, he reiterated that this is only a temporary abandonment, certainly due to his lack of majority support in parliament.

In other words, his victory at the end of 2023 is only a partial success, as even though he won the presidency in the second round of elections, the People's Union of Uganda performed better than him in the first round. Thus, he finds himself governing in a parliament where the majority does not support him and even seeks to oppose him.

Under these circumstances, his governance seems quite challenging.