Most likely a temporary measure while Moscow determines the most effective way to tax miners’ profits.
The Russian Finance Ministry is likely to begin taxing crypto miners based on their electricity usage, rather than the value of their token sales, a top official has claimed.
The state-run news agency TASS reported that Deputy Finance Minister Ivan Chebeskov said on September 18 that his ministry is “considering the launch of an excise tax on electricity for miners.”
Russian Finance Ministry Wants Crypto Tax Rollout
The report claimed that the ministry is “in favor of” a crypto mining tax system that would “initially” take the form of an “indirect tax on the electricity miners consume.”
The media outlet RBC also suggested that the levy would be a stopgap solution before Moscow introduces a tax on miners’ profits.
“Our target remains taxation on profit. This is our long-term goal. We understand that this is, in principle, the correct structure – like everyone else, like any [form of] business. An intermediate system could be based on taxation in the form of excise taxes. However, so far, no decision has been made on this matter.”Russian Deputy Finance Minister Ivan Chebeskov
Stopgap Solution
Moscow does not seem to know how to compute cryptocurrency mining profits accurately, especially if miners use creative bookkeeping.
According to Chebeskov, it would be simpler to “estimate their power consumption than the cost of the mined cryptoassets” because miners might not reveal every wallet.
By the conclusion of the State Duma’s autumn session, the deputy minister stated, the ministry expected MPs to approve a law on crypto mining tax.
Legislators proposed late last year to tax income related to cryptocurrencies instead of profits.
Similar proposals have been made by the Treasury Department. Exchange rate computations, however, might present challenges for these kinds of proposals.
Tax issues related to cryptocurrency are a hot topic in Moscow. Industry representatives have maintained for a long time that they are ready to disclose their business and pay taxes on their profits.
This summer, Moscow finally approved the legalization of industrial crypto mining in order to achieve this goal.
At the time, however, lawmakers declared that they would address the matter of how they would tax miners in a different bill.
(Reuters) – Russian President Vladimir Putin has accepted the Russian Foreign Ministry's proposal to sign a strategic partnership agreement with Iran, according to Putin's order published on the state website.
— Jonathan Landay (@JonathanLanday) September 18, 2024
Crypto Exchanges Still Unregulated
The main source of the issue is that cryptocurrency exchanges cannot be audited in Russia because they lack legal standing.
Some policy-makers have urged Moscow to respond by green-lighting the construction of state-run crypto trading platforms.
According to them, these platforms might be run by institutions such as the Saint Petersburg Currency Exchange and the Moscow Exchange.
However, both exchanges have denied they have any plans in place to start trading cryptoassets.
Global Crypto Mining Leader?
President Vladimir Putin declared earlier this month that Russia was “one of the world leaders” in the field of cryptocurrency mining.
He went on to say that domestic companies in the industry are “earning lots of money,” and that they played a major role in getting the government to finally agree to legalize.
The Kremlin is turning to YouTube to get Putin's message out to the world, even as it’s throttling access for ordinary Russians to the US social media site https://t.co/sF2avRjRf2
— Bloomberg (@business) September 19, 2024
Industry participants have reacted fervently to legalization: The major state-owned oil and gas company, Gazprom, is apparently planning to construct a 5,000-rig cryptocurrency “farm” in Novgorod.
And the regional head of the Russian Komi Republic has announced the construction of 15 new crypto data mining centers.
Industry leaders assert that by 2025, cryptocurrency mining might generate 50 billion rubles ($538.4 million) in tax revenue for the Treasury.
According to the Russian Finance Ministry, they want to make sure that this happens as soon as possible.
According to experts, the majority of Russian miners continue to concentrate their efforts primarily on Bitcoin (BTC).