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Meditari Accountancy Research
Taxation of the Bitcoin: initial insights through a correspondence analysis

Asheer Jaywant Ram,
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analysis", Meditari Accountancy Research, Vol. 26 Issue: 2, pp.214-240, https://doi.org/10.1108/
MEDAR-10-2017-0229
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MEDAR
26,2 Taxation of the Bitcoin:
initial insights through a
correspondence analysis
214 Asheer Jaywant Ram
School of Accountancy, University of the Witwatersrand,
Johannesburg, South Africa
Abstract
Purpose – The Bitcoin has experienced wide popularity in academic and commercial spheres during the years
following 2012. Research has been conducted in respect of information technology, finance and reporting
paradigms, but there has been little research into the taxation of the Bitcoin. The purpose of this paper is to present
a conceptual approach for developing a taxation policy for the Bitcoin, using a multi-jurisdictional analysis.
Design/methodology/approach – An interpretive mixed-method approach is followed. The traits of the
Bitcoin are determined through a review of the literature, followed by the determination of key taxation
themes using a multi-jurisdictional view where the jurisdictions were determined using the largest Bitcoin
exchanges. These form the row and column headings of the correspondence table research instrument,
respectively. The correspondence table was completed by 40 tax experts. Correspondence analysis (a
multivariate statistical technique) was then used to determine correlations between the Bitcoin traits and
taxation themes, further used to present initial insights into developing a taxation policy for the Bitcoin.
Findings – The correspondence analysis reveals that, contrary to current tax laws, the manner of
acquisition as opposed to the reason (intention) for acquisition is key in determining how the Bitcoin is to be
taxed. For taxing purposes, Bitcoin is seen as being distinct from currency, given that transactions with the
Bitcoin are seen as barter transactions. Finally, because of the unique characteristics of the Bitcoin, it is shown
that exchanges and the Bitcoin need to be regulated in the same manner as a currency.
Research limitations/implications – This research focuses on income tax including capital gains tax
and consumption taxes and was conducted with a sample of purposefully selected South African tax experts,
given that the Bitcoin is experiencing enhanced popularity in South Africa. As a result, this research does not
provide generalisable positivist conclusions and does not purport to represent the views of all tax
practitioners. This paper does, however, provide an initial mechanism to develop taxation treatments for
transactions not covered by existing legislation.
Originality/value – This paper is the first to provide normative recommendations on the taxation of the
Bitcoin. Using correspondence analysis, this paper offers an innovative approach for developing taxation
policies when a transaction is not specifically included in the extant legislation. Further value is added
through the use of a third dimension in the correspondence analysis which enhances the exploratory potential
of the research.
Keywords Taxation, Correspondence analysis, Bitcoin, Mixed method, Cryptocurrency
Paper type Research paper
1. Introduction
The Bitcoin and other digital “currencies” represent a possible paradigm shift in the areas of
transactions and banking (Richter et al., 2015). The Bitcoin is not subject to control by any
Meditari Accountancy Research
Vol. 26 No. 2, 2018
pp. 214-240 The author would like to specially thank Warren Maroun and the anonymous reviewers for their
© Emerald Publishing Limited insightful comments on earlier versions of this paper. Thanks are also extended to the respondents
2049-372X
DOI 10.1108/MEDAR-10-2017-0229 who participated in this research and to Lelys Maddock for her invaluable editorial services.
central bank and is, rather, governed by mathematics and cryptography (Nakamoto, 2008; Taxation of
Emery, 2016), where cryptography refers to the use of mathematics and computer science to the Bitcoin
ensure secure digital communication (Burniske and Tatar, 2017).
The European Central Bank (2012; 2015) explored the use and acceptance of the Bitcoin
and noted that it is the dominant cryptocurrency among others, such as Ripple and Litecoin
(Kim, 2016). It is known as a cryptocurrency, as it makes use of techniques from the field of
cryptography to ensure secure validation of transactions (Narayanan et al., 2016). Bitcoin’s
dominance was later confirmed by Hileman and Rauchs (2017) through a global 215
cryptocurrency benchmarking study.
Central Banks around the world have begun to explore the economic impact and
payment mechanism possibilities of the Bitcoin and associated technology (Barrdear and
Kumhof, 2016; Monetary Authority of Singapore, 2016). The South African Reserve Bank
(SARB) Governor, Lesetja Kganyago (2017) provided insight into the SARB’s approach to
the Bitcoin and the blockchain. He noted that there have been related discussions among
technology companies, the banking sector, the tax sector and the SARB with the aim to
determine how to mitigate the associated risks (Kganyago, 2017).

The Bitcoin has been the subject of intense academic enquiry within the past few years
as evidenced by a comprehensive database compiled by Decker (2017). There has been
significant research into the information technology implications of the Bitcoin (Jacobs,
2011; Liu, 2013; Luther, 2013; Reynolds and Irwin, 2017) in addition to there being initial
explorations into the accountability, financial reporting and governance paradigms of the
Bitcoin (Ram et al., 2016). What has not been dealt with in sufficient detail are the tax
consequences associated with the Bitcoin.
There is no consensus about the nature of the Bitcoin and, as a result, there is no
consensus on how the Bitcoin must be taxed (Akins et al., 2014; Global Legal Research
Directorate Staff, 2014). Bitcoin’s increasing popularity (Hileman and Rauchs, 2017),
distributed nature (Kelly, 2015), global reach (Maddox et al., 2016), reliance on self-reporting
due to lack of regulation (Global Legal Research Directorate Staff, 2014) and use as a
mechanism of tax evasion and money laundering (Blundell-Wignall, 2014; Emery, 2016;
Piazza, 2017) present significant challenges and risks to regulators and tax authorities
around the world.
A normative perspective which can provide guidance about the link between the
economic characteristics and the taxation of the Bitcoin is lacking. Using the work of Ram
et al. (2016) as a basis, this research adds to the existing body of taxation research by
advancing possible positions for the taxation of Bitcoin. Using interpretive techniques, the
key traits of the Bitcoin are identified (used as row headings in the correspondence analysis
Table – see Appendix 1). These are used in a correspondence analysis to draw attention to
the links between the traits of the Bitcoin and various taxation treatments (used as column
headings in the correspondence analysis Table – see Appendix 1) which are unearthed
through a multi-jurisdictional taxation thematic analysis using the jurisdictions with the
largest exchanges (Section 2.2 and Figure 2).
The paper’s contribution is practical and methodological. The development of
relationships between the Bitcoin and taxation themes to provide initial insights into
developing a taxation policy for the Bitcoin serves as the practical contribution of this
paper. From a methodological perspective, the use of the correspondence analysis in a
taxation context offers possible regulators and tax authorities a basis for developing
taxation policies when a transaction or event is not specifically included in the extant
legislation – as is the case with the Bitcoin. Additionally, the use of a third dimension in
interpretation of the correspondence analysis (Section 4) provides a further
MEDAR methodological contribution as generally only two dimensions are used (Kudlats et al.,
26,2 2014; Maroun, 2015; Ram et al., 2016).
Given its exploratory nature, this research does not strive to create a general
conclusion in the positivist sense and does not purport to represent the views of all tax
practitioners.
This rest of the paper is structured as follows. Section 2 sets out the approach used by
216 this study. Sections 2.1 and 2.2 expand on the traits of the Bitcoin and the various taxation
treatments, respectively. The use of correspondence analysis is explained in Section 3, and
the results are presented in Section 4. Section 5 deals with the interpretation of the results
and Section 6 concludes the paper.
2. Literature review, taxation themes and formulation of the research

instrument
The main aim of this section is to construct the research instrument using the prior academic
and professional literature. In Section 2.1, the traits of the Bitcoin are explored and annotated
using “R”. In total, 15 traits are identified and are labelled R1-R15. These are used as row
headings in the correspondence analysis Table (Appendix 1). Section 2.2 presents an analysis
of various taxation treatments of the Bitcoin which are annotated using “C”. In total, 15
taxation themes are identified and these are labelled C1-C15.
The row and column headings used were generated as the literature was analysed and
are not presented in any specific order.
2.1 The Bitcoin

The aim of this section is to identify the key traits of the Bitcoin which will form the row
headings in the correspondence analysis (Section 3.3). These key traits are summarised in
Figure 1.
2.1.1 Foundation. The Bitcoin was first explained in a conceptual paper published by
Nakamoto (2008) and the Bitcoin network came online in 2009 (Antonopoulos, 2017).
No physical
form and
Speculative digital Not controlled by
investments single authority
No inherent
Capital value
investments
All transactions
recorded on public
log
Total limited to 21
million
Bitcoin
Easily
transferrable
across the world
Not governed by
macroeconomics
Pseudonymous
Subject to price
fluctuations
Produced using
Traded in Different prices computing power
ordinary course across Means of
of business exchanges payment
Figure 1.
Traits of the Bitcoin
Source: Adapted from Ram et al. (2016, p. 8)
The Bitcoin is generally classified as a cryptocurrency which is a type of digital currency Taxation of
(Chuen, 2015; Kelly, 2015), but this does not necessarily mean that the Bitcoin is treated as a the Bitcoin
currency, as various studies have shown (Barrdear and Kumhof, 2016; Ram et al., 2016; Tan
and Low, 2017). As a result, this trait is identified:
R1: The Bitcoin has no physical form and is digital.
The Bitcoin is, essentially, a computer program and, as a result, is not controlled by any
central bank or other authority (Franco, 2015; Kelly, 2015). This differentiates the Bitcoin
217
from conventional legal tender currencies (Franco, 2015; Narayanan et al., 2016). Parallel to
this, the Bitcoin is not backed by gold or any other precious metals and does not have any
intrinsic value (Chuen, 2015; Franco, 2015). Traits which arise:
R2: The Bitcoin is not controlled by any single authority and itself is unregulated.
R3: The Bitcoin has no inherent value.
2.1.2 Technology. The Bitcoin is firmly embedded in the information technology sphere and
makes use of the globalisation of computer systems (Chuen, 2015; Antonopoulos, 2017). The
Bitcoin functions using a peer-to-peer network of computers known as a distributed system
and each computer in the network is known as a node (Chuen, 2015; Franco, 2015). There are
three main types of systems: centralised, decentralised and distributed. In a centralised
system, there is a single authority which dictates the actions of the system, whereas in a
decentralised system, there are multiple directorial authorities but a single overall authority
(Kelly, 2015). In a distributed system, each node acts as its own authority (Franco, 2015;
Kelly, 2015; Antonopoulos, 2017).
This follows on to the virtual “heart” of the Bitcoin – the blockchain. The blockchain is a
distributed database which records all the transactions which have ever occurred and the
balances held by all users (Chuen, 2015; Franco, 2015; Narayanan et al., 2016). Computing
power is needed to append each transaction to the blockchain – this process is known as
“mining” (Antonopoulos, 2017) (discussed below).
As a result of the blockchain existing on every computer node, it is tamper-proof
(Narayanan et al., 2016; Lin and Liao, 2017). Fraudulent transactions would be disregarded
by the network, as the majority of nodes would not be in agreement with the nodes engaged
in the fraudulent transaction (Narayanan et al., 2016).
R4: Bitcoin transactions are recorded on a public tamper-proof digital ledger.
In addition, the decentralised and distributed nature of the Bitcoin allows for ease of global
transfers (Chuen, 2015; Hendrickson et al., 2016), characterised as:
R5: Bitcoins are easily transferrable across the world.
To transfer Bitcoins, a person must own a digital wallet where the Bitcoins can be stored
(Chuen, 2015; Antonopoulos, 2017). Each wallet has an address (can be more than one) used
by individuals to transfer Bitcoins, and this address has no personal identifying information
(Franco, 2015). In a Bitcoin transaction, the information which is public relates to the
addresses involved in the transaction and the number and value of Bitcoins transferred
(Franco, 2015; Narayanan et al., 2016). What is secret is the private key needed to access the
wallet and spend/transfer Bitcoins (Franco, 2015; Narayanan et al., 2016).
This may seem as if the Bitcoin is completely anonymous, but the existence of the
blockchain (the public ledger of all transactions) allows for parties to be identified where a
personal identity is linked to the address (Franco, 2015; Narayanan et al., 2016; Reynolds and
MEDAR Irwin, 2017). Other information which can be used for identification purposes includes the
26,2 computer IP address (Chuen, 2015). An important attribute of the Bitcoin arises:
R6: Bitcoin transactions and Bitcoin holding addresses are pseudonymous.
Another key aspect of the Bitcoin arises from its acquisition. The Bitcoin can be purchased
on exchanges throughout the world (Section 2.1.3), but it can also be produced using
218 sufficient computing power (Franco, 2015; Antonopoulos, 2017). Using the Bitcoin
programme, complex mathematical puzzles known as cryptographic hash functions are
solved and this process is known as “mining” (Chuen, 2015; Antonopoulos, 2017). Once the
puzzle is solved, a reward of 25 Bitcoins is awarded to the miner (Chuen, 2015;
Antonopoulos, 2017) – as a result:
R7: Bitcoins can be produced using computing power.
2.1.3 Economics. One of the central points of contention is whether the Bitcoin is a currency
(Franco, 2015; Kelly, 2015). Economists generally require currencies to fulfil the following
functions: medium of exchange, unit of account and store of value (Kelly, 2015; Wiseman,
2016).
The Bitcoin is accepted as a means of payment by many retailers (Chuen, 2015; Nieman,
2015; Blau, 2017) and it is clear that the Bitcoin is a medium of exchange (Chuen, 2015;
Franco, 2015). This is made clear by:
R8: Bitcoins are used as a means of payment.
The Bitcoin can be partly considered a unit of account, as some retailers quote prices in
Bitcoin but rarely directly (Franco, 2015). Finally, as a store of value, the Bitcoin fails due to
its swings in price (Franco, 2015; Kelly, 2015).
The Bitcoin can be purchased or sold on various global exchanges – see Section 2.2 for
the largest exchanges in the world. Interestingly, there does not seem to be purchasing price
parity as the Bitcoin trades at various prices on difference exchanges (Brandvold et al.,
2015). The following traits arise:
R9: The Bitcoin trades at different prices on various exchanges.
R10: The Bitcoin is an item traded in the ordinary course of business.
Some have described the Bitcoin as a bubble – a short-lived speculative enthusiasm driving
prices up, resulting in a crash (Cheah and Fry, 2015; Kelly, 2015). One of the factors
contributing to this label is the fluctuating price of the Bitcoin. A commonly quoted Bitcoin
transaction involves the purchase of two pizzas in May 2010 for 10,000 Bitcoins – putting
the value of the Bitcoin at about US$0.004 (McGinnis and Roche, 2017; Roy, 2017). As at 20
July 2017, the price on the CoinCheck (2017) exchange (largest by volume – Figure 1) was at
approximately US$2,327 converted from Japanese Yen. This volatility is encapsulated as:
R11: The value of the Bitcoin has fluctuated from US$0.004 to 2,327.
The Bitcoin exists outside of the conventional regulatory space for currencies which serve as
legal tender and, consequently, is not subject to macroeconomic forces such as fiscal and
economic policies (Böhme et al., 2015). A key trait refined as:
R12: The Bitcoin is not governed by traditional macroeconomic variables.
Following the economic principle of deriving some value from scarcity (Hayes, 2016), the
Bitcoin has an in-built limit on the number of Bitcoins which can ever be in circulation – 21
million (Nakamoto, 2008; Chuen, 2015). As at 19 July 2017, only 16,457,550 Bitcoins have Taxation of
been mined (Blockchain Luxembourg, 2017), so this limit is yet to be reached. This is the Bitcoin
accounted for in:
R13: The maximum number of Bitcoins that can exist is 21 million.
2.1.4 Application. In addition to being used as a means of payment (Nieman, 2015; Blau,
2017), the Bitcoin is also used for investment purposes because its low correlation with other 219
asset classes (such as bonds or shares) (Franco, 2015; Narayanan et al., 2016). Another side
of this is trading off the volatility of the Bitcoin – i.e. speculative investing (Chuen, 2015).
These are summarised as:
R14: Bitcoins are capital investments and are used for portfolio diversification.
R15: Bitcoins are used for speculative purposes.
Within Figure 1, the significant traits of the Bitcoin which were identified in this section
have been summarised (adapted from Ram et al., 2016). These significant traits form the
basis of the rows (R1-R15) in the correspondence table (Appendix 1).
2.2 Taxation treatment

To identify the taxation treatment themes, one must first consider tax policy in a broad
sense. Tax policy involves determining the types and mixes of taxes to be levied and the
related structures and tax rates (Shome, 1995; Organisation for Economic Co-operation and
Development (OECD), 2017). The broad categories of taxes include consumption taxes,
customs and excise taxes, environmental taxes, income taxes including capital gains tax
(CGT), wealth taxes and wealth transfer taxes [Organisation for Economic Co-operation and
Development (OECD), 2017].
Consumption tax includes value-added tax (VAT) or goods and services tax (GST) and is
an indirect tax that is generally borne by the consumer on the purchase of goods or services
(Stiglingh, 2018, p. 16). Customs and excise taxes are levied on the importation and
manufacture of certain goods, respectively, and are also indirect taxes (Stiglingh, 2018,
p. 16). Environmental taxes seek to address non-environmentally friendly practices and
include, among others, carbon taxes (OECD, 2011). Taxable income is taxed through income
tax, and CGT is a tax on receipts or accruals of a capital nature (Stiglingh, 2018, p. 14).
Wealth taxes include death taxes and estate duty that tax the movement of wealth from one
generation to another due to death (Institute on Taxation and Economic Policy, 2012;
Stiglingh, 2018, p. 16). Wealth transfer taxes include donations tax or gift tax levied on
donations made inter vivos and transfer duty, a tax on the sale of immovable property (Gale
and Slemrod, 2001; Stiglingh, 2018, pp. 15-16).
A delimitation to be noted is that the focus of this paper is on the technical dimension of
income taxes, CGT and consumption taxes, as these are the most common types of taxes
(Gale and Slemrod, 2001; Stiglingh, 2018).
Tax policy, embedded through legislation, is explored through a multi-jurisdictional
legislation analysis. The purpose is to identify the key taxation treatment themes. The aim
of this exercise is not to prove a statistical relationship but to identify initial links among the
various taxation treatments. Further, the related structures and quantitative rates of the
taxes are not within the scope of this research.
Specific taxation treatments are used as the column headings, C’s, in the correspondence
analysis Table (Appendix 1).
MEDAR In determining which jurisdictions to analyse, the largest Bitcoin exchanges (as per
26,2 Figure 2) are determined, and the jurisdictions in which they operate are selected for
Bitcoin taxation treatment analysis (Bitcoincharts, 2017). Regulators have expressed an
interest in regulating exchanges using a risk-based approach, as opposed to regulating
holders or wallet providers of digital currencies (Gamble, 2017). This makes exchanges
and the jurisdictions in which they operate a nexus of regulatory scrutiny. In addition,
220 the use of Bitcoin exchanges based on market share for exploratory purposes is
consistent with prior research (Brandvold et al., 2015).
The usage of multiple jurisdictions based on the largest Bitcoin exchanges also allows for
an international aspect of taxation to be brought to light, eliminating subjectivity and bias
which may arise from cherry-picking countries. This usage is further supported by Germany’s
central bank director who noted that the regulation of cryptocurrencies should be global and
harmonised (De, 2018). It is also important to note that the purpose of this section is not to serve
as a technical taxation manual but to highlight the key taxation treatments at an overall level
comparable across jurisdictions.
As at 7 July 2017, based on the past 30 days, the following were the largest exchanges
(5 per cent or more of market share – representing 88 per cent of volume) as per Figure 2
(Table I).
Figure 2.
Exchange volume
distribution
Exchange Jurisdiction of incorporation
Coin check Japan

Coinbase USA
Kraken USA
Table I. Bitstamp UK
Bitcoin exchanges BTC China China
and related BTC-E Russia
jurisdictions Korbit South Korea
The taxation analysis of the Bitcoin in the jurisdictions identified above with the Taxation of
purpose to determine the taxation treatment themes of the Bitcoin (C’s) which form the the Bitcoin
column headings in the correspondence table research instrument (Appendix 1) is
discussed below.
2.2.1 United States of America. The US Internal Revenue Service (IRS) (2014) noted that
the Bitcoin is convertible virtual currency which can be used as a medium of exchange,
without legal tender status.
The overall consensus of the IRS (2014) is that the Bitcoin is treated as property, not as a
221
currency. This results in the following column heading:
C1. Bitcoins should be taxed as a capital asset.
Taxpayers who receive payment in Bitcoin must include the fair market value of the Bitcoin
in their gross income (IRS, 2014). The IRS (2014) requires that the fair market value of the
Bitcoin be determined with reference to a market-driven exchange. As noted by R11, the
Bitcoin price is volatile and dissimilar across exchanges, and as a result, there can be
complications when determining the fair market value of the Bitcoin. This is, however,
outside the scope of this research.
The adjusted basis of a Bitcoin is the cost of the Bitcoin plus any improvements with a
useful life exceeding 1 year and less certain deductions (IRS, 2016). Where the fair market
value of the Bitcoin exceeds the adjusted basis, a taxpayer has a taxable gain, else the
taxpayer has a loss (IRS, 2014). The following column headings can be extracted:
C2. Fair value gains should be taxed.
C3. The market value of the Bitcoin is the key taxable figure.
The fair market value, if not in US$, must be translated into US$ at the date of payment or
receipt using a reasonable and consistent method (IRS, 2014). As this is not prescriptive,
either spot or average rates can be used. In International Accounting Standard (IAS) 21 of
the International Financial Reporting Standards (IFRS) items which are capital in nature are
translated at spot rate on the transaction date, and income earned over time is translated at
average rates (International Accounting Standards Board, 2015). This highlights a
distinction between the capital or revenue nature of the Bitcoin which is further explored
below. As a result, the following general treatments arise:
C4. Bitcoins should be translated into the taxable currency using the spot rate on the date of the
transaction.
C5. Bitcoins should be translated into the taxable currency using the average rate for the relevant
tax year.
The IRS has no single treatment for Bitcoin taxable gains and losses – what is crucial
is the character of the gain or loss (IRS, 2014). Where the Bitcoin is held as a capital asset,
the gain or loss is capital in nature. This occurs when the Bitcoin is, generally, held as
investment property (IRS, 2014). On the other hand, if the Bitcoin is not held as a capital
asset (income in nature), the gain or loss will be an ordinary gain or loss (IRS, 2014). This
mainly refers to Bitcoins which are held for sale to customers as inventory (IRS, 2014).
These views are corroborated by the business model approach originating from research
by Ram et al. (2016) which stated that the economic rationale for holding the Bitcoin must
be communicated.
For differentiation between whether a Bitcoin is capital or revenue in nature, the IRS
(2017) notes the following.
MEDAR Assets which are capital in nature (IRS, 2017):
26,2 shares and bonds;
a personal residence;
household furnishings;
a car whose main purpose is for pleasure or commuting;
222 coin or stamp collections;

gems and jewellery;
gold, silver and other metals;
timber grown on owned or investment property, even if casual sales of timber are
made;
personal-use property; and
investment property.
Assets which are not capital (revenue) in nature (IRS, 2017):

stock in trade, inventory, and other property held mainly for sale to customers;
accounts or notes receivable acquired in the ordinary course of a trade or business;
depreciable property used for business;
real property used for business or as rental property;
a copyright; a literary, musical, or artistic composition; a letter; a memorandum or
similar property;
US government publications acquired free from the government (or for less than the
normal sales price);
any commodities derivative financial instrument held by a commodities derivatives
dealer, unless not related to dealing activities;
any clearly identified hedging transaction; and
supplies of a type which is regularly used or consumed in the ordinary course of
business.
As seen by comparing the capital assets with the non-capital assets, the crux of the matter is
the intention – personal use or dealing activities and as a result:
C6. The intention for which the Bitcoin was acquired determines and held is a key taxation
indicator.
This economic rationale and intention around the Bitcoin introduces two treatments:
Bitcoins are subject to income tax and Bitcoins are subject to CGT. Further, in the USA,
company capital gains are taxed at the same rate as ordinary gains for income tax purposes
(EY, 2017a). There is, therefore, no distinction between capital or revenue nature Bitcoins for
a company. For an individual, capital gains on long-term assets (held for more than 365
days) are taxed at rates less than the ordinary taxable income rate (EY, 2016). This makes
the distinction for an individual crucial for tax purposes. Following on, this treatment is
evident:
C7. Bitcoins are subject to income tax.
C8. Bitcoins are subject to CGT.
Another aspect where the IRS has provided guidance relates to the mining of the Bitcoin Taxation of
(Section 2.1.2). When a Bitcoin is successfully “mined”, the fair market value is included in the Bitcoin
gross income (IRS, 2014). If the mining is not as a result of activities carried out as an
employee and is carried out as a trade or business, the gains are subject to self-employment
tax (IRS, 2014).
C9. The production of Bitcoins using computing power is a taxable event.
C10. The manner in which the Bitcoin is acquired (through mining or purchase) determines how it
223
is taxed.
In addition, where remuneration for services rendered by employees is paid in Bitcoin, the
medium is regarded as irrelevant (IRS, 2014). The payment will still be subject to payroll
taxes (federal income tax withholding, and in terms of the Federal Insurance Contributions
Act tax and the Federal Unemployment Tax Act tax) (IRS, 2014).
C11. Bitcoins are subject to payroll taxes.
The USA does not provide for a national VAT, as each state has its own independent VAT
rules (EY, 2017b). As a result, the IRS (2014) is silent on the VAT treatment of the Bitcoin,
and, so far, no state has issued any guidelines on the VAT treatment of the Bitcoin (Benscha,
2016).
2.2.2 United Kingdom and European Union. VAT is a European Union (EU) tax, so
treatment in the UK must align with treatment across the EU member states (Her Majesty’s
Revenue and Customs (HMRC), 2014; Adler-Nissen et al., 2017). For this reason, there is no
separate analysis of the UK’s specific VAT treatment of the Bitcoin.
Within the EU, the Court of Justice of the European Union (2015) ruled in Skatteverket v.
David Hedqvist that the exchange of traditional legal tender currencies for Bitcoin is exempt
from VAT. This ruling was arrived at through application of the provisions concerning
transactions relating to currencies and legal tender (Court of Justice of the European Union,
2015). The purpose was to ameliorate the complexities associated with determining the
taxable amounts under financial transactions (Court of Justice of the European Union, 2015).
This also shows that the Bitcoin is treated as a type of currency.
C12. Bitcoins should not be subject to VAT.
C13. Bitcoins should be taxed as a currency.
The HMRC (2014) emphasise on the fact that any gains or losses arising on transactions
with the Bitcoin are to be evaluated on individual circumstances. It is also noted that a
Bitcoin transaction could be “highly speculative”, so that the gains are not taxable and
losses not able to be offset (HMRC, 2014). An example of such a transaction is gambling or
betting gains or losses (HMRC, 2014).
Interestingly, the Bitcoin is treated somewhat as a quasi-currency in that exchange
movements between the currency of the Bitcoin and the entity’s currency used to prepare
financial statements is taxable (HMRC, 2014). This is accounted for in C13 but the following
does arise:
C14. Foreign exchange gains on Bitcoins should be subject to tax.
There is no need for bespoke rules for the Bitcoin according to the HMRC (2014). The
implication of this is that transactions with the Bitcoin are to be taxed with reference to
the nature of the activities (used to ascertain whether the receipt or expenditure is
revenue or capital in nature) and the status of the parties (to determine whether income
MEDAR tax, CGT or corporation tax is applicable) (Wong, 2016). This reaffirms C6, C7 and C8
26,2 identified above.
Where profits or losses are outside trading activities, CGT could be applicable
(HMRC, 2014). In the UK, however, corporations are taxed on capital gains at the
corporate tax rate; there is no separate tax rate (EY, 2017a). This is similar to the USA
(Section 2.2.1). For an individual, CGT could be applicable (HMRC, 2014). Where a non-
224 incorporated entity enters into Bitcoin transactions, these are taxable as per normal
income tax rules (HMRC, 2014). These taxation treatments have already been
considered in C6, C7 and C8.
2.2.3 Japan. Japan operates a system known as the Japanese Consumption Tax (JCT),
which is similar to VAT and GST (Deloitte Tohmatsu Tax Company, 2016). Under this
system, Bitcoin transactions were not exempt and were subject to JCT at a rate of 8 per cent
(Deloitte Tohmatsu Tax Company, 2016; EY, 2017b). Subsequent amendments have the
effect that from 1 July 2017, Bitcoin transactions will be exempt from JCT (Deloitte
Tohmatsu Tax Company, 2016). This has already been considered in C12.
Other than the impact of JCT, Japan has issued no other guidance on taxation of the
Bitcoin. Japan, however, has implemented new laws and regulations around Bitcoin and
other virtual currency exchanges (Ohashi and Koinuma, 2017) providing evidence of the
focus on exchanges explained by Gamble (2017) (see C15 below).
Japan has also taken the step to characterise the Bitcoin as legal tender (Keirns, 2017) –
which could lead to the Bitcoin being taxed as a currency, as encapsulated in C13.
2.2.4 China, Russia and South Korea. The Bitcoin has experienced great popularity with
millennials in China who are profiting from trading tax-free (Hawkins, 2017).
China does not currently have any taxation laws, but the People’s Bank of China
(PBOC) has exerted significant regulatory pressure on Bitcoin exchanges. The PBOC has
published a list of violations which may see exchanges blacklisted if infringed (BI
Intelligence, 2017). Examples of violations include tax evasion, offering margin trades
and artificially increasing trading volumes by providing fee-free Bitcoin trades (BI
Intelligence, 2017). This is in line with the global call for exchange regulation (Gamble,
2017).
Russia has no concrete guidance on the taxation and VAT treatment of the Bitcoin
(Kharpal and Cutmore, 2017). The governor of the Russian Central Bank stated that
regulation of the Bitcoin should be informed by its nature as a digital asset and not currency
(Kharpal and Cutmore, 2017). This could have the effect of directing future taxation
treatment and was accounted for in C1.
South Korea has little guidance on the taxation of the Bitcoin, other than clarity being
issued that the Bitcoin is not subject to CGT (Herh, 2017). In a similar vein to Japan, South
Korea is in the process of implementing regulations to impose registration and reporting
requirements on those who intend to deal in virtual currencies, including the Bitcoin (Herh,
2017).
Based on these jurisdictions, the following theme arises:
C15: The Bitcoin is not taxable, but exchanges must be regulated.
The tax themes recognised above are corroborated by more than one jurisdiction as the
themes are representative of fundamental tax principles that apply across multiple
jurisdictions. Indeed, comparative tax policy studies are undertaken between multiple
jurisdictions (OECD, 2017) emphasising the comparability of these essentials of tax policy. It
is for this reason that validity is not compromised by the tax experts being South African.
3. Data and method Taxation of
This research is interpretive and exploratory in nature (Creswell, 2014) and strives to the Bitcoin
explore the taxation of the Bitcoin in an innovative way. A positivist generalisable
conclusion is not the aim of this paper, which is consistent with other exploratory studies
(Maroun, 2015; Ram et al., 2016).
First, the traits of the Bitcoin and taxation themes were generated through a detailed
content analysis of the extant literature (Section 2). The traits of the Bitcoin were then used
to generate the row headings in the correspondence table, with the taxation themes forming 225
the column headings (Appendix 1). This resulted in a 15-column by 15-row frequency table
(15 15). The order of the rows and columns and accompanying notation has no particular
meanings and were ordered based on their appearance in the content analysis.
This table is subject to the correspondence analysis method, explored further in Section
3.1. A mixed method study was undertaken (Guest et al., 2013; Creswell, 2014; Leedy and
Ormrod, 2014). The content analysis, together with the responses from the correspondence
table, is used in a statistical context to allow for meaningful interpretation of the results.
3.1 Correspondence analysis

A correspondence analysis (Beh and Lombardo, 2014; Kudlats et al., 2014) was carried out
with tax experts, namely, South African taxation academics, consultants and practitioners,
with a minimum of 3 years’ experience in tax. These tax experts were purposefully selected
through their involvement in tax practice. Purposive sampling of tax experts is appropriate
because the tax experts must be able to inform the phenomenon being studied and must
provide representation of important elements in the research question (Sargeant, 2012). This
also adds to the quality of results (Maroun, 2017). Furthermore, the purpose of this study is
to identify relationships between the Bitcoin and taxation themes to develop a taxation
policy, therefore, as seen in other exploratory studies (Maroun, 2017), examining the
opinions of varying stakeholders is outside the scope of this research.
A delimitation exists in that these tax experts are from South Africa due to convenience,
but this is tempered by the fact that the Bitcoin has experienced growing popularity in
South Africa (Antonovici, 2018; BusinessTech, 2018).
The purpose of the correspondence analysis is to explore correlations between the traits
of the Bitcoin (row headings) and taxation themes (column headings) so as to present an
initial insight into Bitcoin taxation grounded in interpretive epistemology (following on
from the precedent set in Ram et al., 2016).
Correspondence analysis is a multivariate statistical technique used to explore particular
subject matter and is becoming more prevalent as an effective means of research, with a
marked increase noted from 1996 (Beh and Lombardo, 2014). This technique has previously
been used in relevant exploratory research in taxation (Maroun et al., 2011; Maroun et al.,
2014), auditing (Maroun, 2015), business (Kudlats et al., 2014; Fietze and Boyd, 2017),
management accounting (Chatzipetrou and Moschidis, 2016) and Bitcoin accounting
research (Ram et al., 2016).
The correspondence table (see Appendix 1) is known as a contingency table for the
purposes of statistical analysis (Beh and Lombardo, 2014). In this instance, the strength of
association between the Bitcoin traits and taxation themes is considered.
A sample of 40 tax experts completed the correspondence table. The respondents were
contacted by the researcher and were provided with explanations of the reason and nature of
the research. They were provided with a consent form, a brief explanation of the research
technique, instructions on how to complete the table and the final correspondence table. A
pilot study was undertaken at the University of the Witwatersrand, South Africa, to
MEDAR ascertain the validity and appropriateness of the correspondence table. Additionally, the
26,2 standardisation of the research instrument provided to the respondents serves to enhance
the reliability of the study (Leedy and Ormrod, 2014).
Respondents were asked to mark with a “1” cells where they felt that the traits of the
Bitcoin (rows) corresponded with the taxation themes (columns). It was noted and made
clear to the respondent that cells could be left blank, and they could place as many ‘1’s’ as
226 they felt necessary. The results from each respondent were then aggregated into a single
contingency table.
Once the results of the correspondence tables were aggregated, a statistical programme
(STATA) was used to generate the descriptive statistics and the correspondence plot (Beh
and Lombardo, 2014; Kudlats et al., 2014) (Section 4). These statistics and the plot are then
subject to further analysis in Section 5. In this regard, the methodical sequence of steps
applied by Kudlats et al. (2014) has been adapted, similar to the application in Ram et al.
(2016).
The first step is to assess the strength of the association between the Bitcoin traits and
the taxation themes. This is interpreted through the square root of the inertia (Kudlats et al.,
2014). Inertia is the key measure of association within the visual map (Beh and Lombardo,
2014).
Second, a suitable number of dimensions must be determined. The maximum number of
dimensions for the visual map were determined as 14 – being the lesser of the number of
columns (15 taxation themes) and rows (15 Bitcoin traits), less 1 (Beh and Lombardo, 2014).
This is also known as the degrees of freedom. Generally, two dimensions of the visual map
are accepted as suitable due to the difficulty in analysing visual maps with three or more
dimensions (Agresti, 2002, p. 615; Hair et al., 2010). The use of three or more dimensions is,
however, possible if two dimensions do not provide suitable explanation of the inertia of the
Bitcoin traits and taxation themes (Agresti, 2002; Hair et al., 2010).
The third step involves interpretation of the dimensional representation. This involves
determining which traits and taxation themes are prominently displayed in the visual map.
This was carried out by identifying which Bitcoin traits (row headings) and taxation themes
(column headings) contributed significantly to the total inertia of the respective dimension.
To determine the significance of the traits and themes, the total inertia is allocated
independently but equally to the Bitcoin traits and taxation themes. This will assist in
determining the average inertia per trait and theme (Kudlats et al., 2014; Maroun, 2015).
Where the inertial contribution of a trait or theme exceeds the average inertia per the traits
or theme, that trait or theme is regarded as significant (Kudlats et al., 2014; Maroun, 2015).
After the significant taxation themes were ascertained, the visual placing of these
taxation themes on the map (based on the co-ordinates) were then explored in greater detail.
Based on whether the taxation theme was significant in Dimension 1, Dimension 2 or
Dimension 3, the themes were then assigned a dimensional reference. Significance in
Dimension 1 indicated that it lay on the x-axis, significance in Dimension 2 indicated that it
lay on the y-axis and significance in Dimension 3 indicated that it lay on the z-axis. The sign
(positive or negative) of the co-ordinate provided evidence as to whether it was on the
positive or negative side of the relevant axis.
For each of the above placements, the grouping of significant themes was analysed for
relationships and interconnections. This aids in naming the dimensions. Based on these
findings, a name was given to each of the six-axis placements. The axes of the final visual
plot were, consequently, named in terms of the taxation themes which provided the best
explanation of the respective dimensions. It is important to keep in mind that this is a
normative process but is consistent with prior studies (Kudlats et al., 2014; Maroun, 2015; Taxation of
Ram et al., 2016; Fietze and Boyd, 2017). the Bitcoin
Finally, the researcher evaluated the relationship between the dimensions to determine
the perception of the relationship between the traits of the Bitcoin and the taxation themes.
The correlation between the Bitcoin traits and certain taxation themes presents an initial
view as to the principles which best inform how the Bitcoin should be taxed (adapted from
Maroun et al., 2011; Kudlats et al., 2014; Ram et al., 2016). Peer debriefing (Creswell, 2014, p. 227
202) with an experienced researcher was undertaken to add validity to the research findings.
The initial analysis of the relationship between the traits of the Bitcoin (R’s) and the taxation
themes (C’s) is presented in Section 4, with further analysis in Section 5.
4. Results
The x 2 statistic at 192 degrees of freedom is 452.60 and exceeds the critical value using a
99.9 per cent confidence level. This metric provides evidence that there is a statistically
significant relationship between the Bitcoin traits and taxation themes in the
correspondence table. Relevant descriptive statistics are presented in Table II.
The total inertia is explained in 14 dimensions. Table II also shows that, of the total
inertia, 73.61 per cent is explained in three dimensions. Dimension 1 is the x-axis, Dimension
2 is the y-axis and Dimension 3 is the z-axis in the visual map. As discussed in Section 3.1,
the inclusion of more than two dimensions increases the difficulty of analysing the visual
map with three or more dimensions (Agresti, 2002, p. 615; Hair et al., 2010). In this instance,
however, only 56.38 per cent of the inertia is explained in two dimensions necessitating the
use of a third dimension (the z-axis).
Only those Bitcoin traits (R’s) and taxation themes (C’s) with inertia exceeding the
average are included in the analysis for a statistically significant interpretation. The number
of traits and themes is 15 (see Appendix 1), so statistically significant points are those with
contributions exceeding 6.67 per cent (100 per cent inertia divided by the 15 traits and 15
themes, respectively). The statistically significant points are then included in the
correspondence plot (Figure 3). These traits and taxation themes are summarised in
significant taxation themes and Bitcoin traits:
(1) Taxation themes (column headings):

C1: Bitcoins should be taxed as a capital asset.
C2: Fair value gains should be taxed.
C3: The market value of the Bitcoin is the key taxable figure.
C7: Bitcoins are subject to income tax.
Statistic Value
Active rows 15
Active columns 15
Number of observations 1 543
Pearson’s x 2 (192) 452.60
Prob > x 2 0.0000
Total inertia 0.2933
Number of dimensions 3 Table II.
Explained inertia (three dimensions) 73.61% Descriptive statistics
MEDAR
26,2
228
Figure 3.
Correspondence plot
C8: Bitcoins are subject to CGT.

C9: The production of Bitcoins using computing power is a taxable event.
C10: The manner in which the Bitcoin is acquired (through mining or purchase)
determines how it is taxed.
C13: Bitcoins should be taxed as a currency.
C15: The Bitcoin is not taxable, but exchanges must be regulated.
(2) Bitcoin traits (row headings):
R2: The Bitcoin is not controlled by any single authority and itself is unregulated.
R6: Bitcoin transactions and Bitcoin holding addresses are pseudonymous.
R7: Bitcoins can be produced using computing power.
R8: Bitcoins are used as a means of payment.
R11: The value of the Bitcoin has fluctuated from $0.004 to $2,327.
R14: Bitcoins are capital investments and are used for portfolio diversification.
R15: Bitcoins are used for speculative purposes.
Using the co-ordinate sign and dimension of each taxation theme (C’s) (see Appendix 3) the
x-, y- and z-axes are labelled. This involves determining the dimension of the statistically
significant taxation themes and then determining where on the axis the taxation themes are
positioned (adapted from Bendixen, 1996; Maroun et al., 2011; Ram et al., 2016). The co-
ordinate sign does not indicate strength of any relationships but merely provides its position
relative to the three axes (Ram et al., 2016). The name of each axis, developed interpretively
by the researcher, is set out in Table III.
Table IV presents the axes, the labels of the axes as determined in Table III and the Bitcoin
traits (R’s) which are statistically significant (contributes more than 6.67 per cent to the inertia –
see Appendix 2). This is used to inform the creation of Figure 3 and represents the
correspondence plot to be used for further analysis. The results were allocated into six areas
based on the sign of the co-ordinates in each dimension. For example, R2 was statistically
significant in Dimensions 1 and 3 (contribution of 7.40 and 28.60 per cent, respectively, both
exceeding the average of 6.67 per cent). The R2 co-ordinates were both positive, indicating that
R2 lies on the positive Dimension 1 axis (x-axis) and positive Dimension 3 axis (z-axis). The
name given to each area (developed interpretively above) is included in Figure 3.
Axis Significant taxation themes Axis name
Taxation of
the Bitcoin
Positive x-axis C9: The production of Bitcoins using computing power is Taxing event
(Dimension 1 in a taxable event.
Figure 3) C10: The manner in which the Bitcoin is acquired
(through mining or purchase) determines how it is taxed.
C15: The Bitcoin is not taxable, but exchanges must be
regulated 229
Negative x-axis C2: Fair value gains should be taxed. Taxed as a
(Dimension 1 in C3: The market value of the Bitcoin is the key taxable speculative asset
Figure 3) figure
Positive y-axis C1: Bitcoins should be taxed as a capital asset. Taxed as a capital
(Dimension 2 in C8: Bitcoins are subject to CGT asset
Figure 3)
Negative y-axis C7: Bitcoins are subject to income tax Subject to income
(Dimension 2 in tax
Figure 3)
Positive z-axis C13: Bitcoins should be taxed as a currency. Bitcoin as a currency

(Dimension 3 in C15: The Bitcoin is not taxable, but exchanges must be
Figure 3) regulated
Negative z-axis C7: Bitcoins are subject to income tax. Mining as an income
(Dimension 3 in C9: The production of Bitcoins using computing power is tax event Table III.
Figure 3) a taxable event Names of the axes
Axis and name Significant Bitcoin traits
Positive x-axis (Dimension 1 R2: The Bitcoin is not controlled by any single authority and itself is
in Figure 3) unregulated.
Taxing event R6: Bitcoin transactions and Bitcoin holding addresses are pseudonymous.
R7: Bitcoins can be produced using computing power
Negative x-axis (Dimension R11: The value of the Bitcoin has fluctuated from $0.004 to $2,327
1 in Figure 3)
Taxed as a speculative asset
Positive y-axis (Dimension 2 R14: Bitcoins are capital investments and are used for portfolio
in Figure 3) diversification
Taxed as a capital asset
Negative y-axis (Dimension R8: Bitcoins are used as a means of payment
2 in Figure 3)
Subject to income tax
Positive z-axis (Dimension 3 R2: The Bitcoin is not controlled by any single authority and itself is
in Figure 3) unregulated.
Bitcoin as a currency R6: Bitcoin transactions and Bitcoin holding addresses are pseudonymous
(marginally significant element included to enhance interpretation –
marked with an asterisk) Table IV.
Negative z-axis (Dimension R7: Bitcoins can be produced using computing power. Relationship between
3 in Figure 3) R15: Bitcoins are used for speculative purposes axes and Bitcoin
Mining as an income tax event traits
5. Discussion
The fact that the Bitcoin is not controlled and is unregulated (R2) is of concern to
respondents, as this is a significant trait identified. This, together with the fact that the
Bitcoin is pseudonymous (R6) and can be produced (mined) (R7) led respondents to
MEDAR highlight mining as a taxable event (C9). How the Bitcoin is taxed is then determined
26,2 through how the Bitcoin was acquired (C10). A related taxation theme was that the Bitcoin
is not taxable but that exchanges should be regulated (C15) – this indicates that respondents
felt strongly that the lack of control and identification parameters needs regulation but that
tax is a necessary requirement as shown by the interactions in the positive x-axis
(Dimension 1). It appears that the tax event is the process of mining as opposed to the
230 Bitcoin itself, with tax manifest on the realisation of the Bitcoin after mining.
Together with this analysis, the intention of the acquiring the Bitcoin was not seen as relevant
(as C6 was not statistically significant in any dimension). This presents a departure from
conventional tax treatment as discussed by the IRS (2014) and HMRC (2014) where the focus is on
the intention with which the Bitcoin is acquired, as opposed to the method of acquisition. The
globalisation of the Bitcoin, lack of control, regulation and uncertainty as to who the participants
are in the transaction (Narayanan et al., 2016) provide difficulty in qualifying the intention of the
individuals. As a result, from a practical perspective, the focus is on the method of acquisition, as
opposed to the intention at acquisition which is difficult to determine.
By virtue of investing in the Bitcoin, individuals will be subject to volatility (R11).

Respondents characterised investments in the Bitcoin as speculative in nature as any fair
value gains would be taxed (C2), together with tax being levied on the market value (not
cost) (C3). The fact that no CGT themes came through here indicated that the full gains
would be fully taxable (i.e. no reduced CGT rates would be applicable). This also highlights
the fact that, again, the intention is not relevant and the Bitcoin will be subject to tax.
To summarise, the analysis reveals that the x-axis (Dimension 1) provides evidence of the
tax following the economics and taking into account the digital nature of the Bitcoin. The
negative x-axis shows the speculative element and the positive x-axis shows the tax on
realisation of the Bitcoin.
On the other hand, respondents felt that where the Bitcoin could be proved to be a capital
investment, and it is used for portfolio diversification (R14), then it could be taxed through
CGT rates (C1, C8). There is no indication that one is trading off of volatility here, but, given
that the negative x-axis (Dimension 1) strongly showed that investing in the Bitcoin, at face
value, was taxed under income tax, there is a requirement on the part of the investor to
prove that the investment is capital in nature.
It is further indicated by respondents that where the Bitcoin is used as a means of
payment (R8), it is subject to income tax (C7). This introduces another peculiarity in that it
appears respondents do not see the fact that the Bitcoin can be used as a payment
mechanism to mean that the Bitcoin is currency as understood for tax purposes. On the
contrary, it appears that using the Bitcoin as a means of payment and then subjecting it to
income tax shows that the Bitcoin is an asset and the transactions are barter transactions.
Further enhancing this interpretation is the reality that the Bitcoin being used as a means of
payment (R8) is not significant in the positive z-axis (Bitcoin as a currency). The contrast
between the Bitcoin being taxed as capital or income is highlighted by the fact that they are
on each end of the y-axis (Dimension 2) – showing the two alternate tax systems.
The positive and negative z-axes show that the Bitcoin’s economic reality is either as a
currency or an asset which is mined (Ram et al., 2016). On the positive z-axis, respondents
noted that the Bitcoin should be taxed as a currency (C13). Together with this, respondents
also indicated that the Bitcoin should not be taxed but exchanges through which
transactions flow, should be regulated (C15). What is clear is that the interaction between
these themes shows that respondents believed that where a Bitcoin is regulated like a
currency, there will be no tax (as is the case with conventional currencies). The lack of
control by a central authority (R2) and pseudonymity of the Bitcoin (R6) led respondents to
believe that the exchanges should be regulated and where regulated, the Bitcoin could then Taxation of
be seen as a currency not subject to tax. the Bitcoin
The mining of Bitcoins (R7) is seen to be a highly speculative event (R15), and, as a
result, the mining is taxable (C9) and the Bitcoins are subject to income tax (C7). Again, this
places emphasis on how the Bitcoin was acquired as opposed to why it was acquired.
6. Conclusion 231
The Bitcoin is becoming more widely embraced and represents a paradigm shift in financial
technology (Richter et al., 2015). While there has been research on the Bitcoin in the fields of
information technology (Jacobs, 2011; Liu, 2013; Luther, 2013; Reynolds and Irwin, 2017) and
accounting (Ram et al., 2016), a lack of normative research on the taxation of the Bitcoin was
identified. The purpose of this paper is to provide initial insights into the development of a
taxation policy for the Bitcoin.
This purpose is achieved in two stages. First, the traits of the Bitcoin were identified
through a detailed literature review (Section 2.1). This is followed by identifying taxation
themes through a multi-jurisdictional analysis of tax policy for the Bitcoin in jurisdictions
where the largest exchanges exist (Section 2.2). Exchanges were used because of the
increasing focus of regulators (Gamble, 2017). The Bitcoin traits and the taxation themes then
formed the row and column headings in the research instrument, respectively (Appendix 1).
Second, the correspondence table was completed by tax experts, and the results were
then aggregated and subject to a multivariate statistical technique known as
correspondence analysis (Beh and Lombardo, 2014) (Section 3). The results of the
correspondence analysis are set out in Section 4 and the final output for the results is
the correspondence plot (Figure 3).
Section 5 discusses the results and interpretation of the correspondence plot
(Figure 3). It was revealed that the emphasis for taxation of the Bitcoin is the manner of
acquisition as opposed to the reason (intention) for acquisition. This paper, therefore,
corroborates and can be linked to the research on accounting for the Bitcoin, which
places emphasis on the business model of the entity guiding the accounting thereof
(Ram et al., 2016).
In addition, the Bitcoin is seen as being distinct from currency, with transactions
involving the Bitcoin being regarded as barter transactions. It also appears that
respondents are convinced that exchanges need to be regulated, given the uninhibited
and mostly anonymous nature of the Bitcoin. This ties in with the increased focus by
regulators on exchanges (Gamble, 2017). Interestingly, while it appears that the Bitcoin
is not taxed as a currency, the regulation espoused takes the form of regulating the
Bitcoin as a currency.
It is important to note that this paper does not strive to create a general conclusion in
the positivist sense and does not purport to represent the views of all tax practitioners.
As a result, more interpretive techniques are needed to provide further insight into the
taxation of the Bitcoin. The taxation themes were derived from the technical aspect of
income taxes, CGT and consumption taxes, therefore, detailed analysis of extant
Bitcoin tax policy is an area for further research. Additionally, multiple tax
stakeholders, could, for example, be consulted to determine their views and this would
then inform how the taxation policy is to be developed, balancing all the expectations of
the relevant tax stakeholders. This paper does, nonetheless, provide a unique method
for developing a tax policy for items and transactions that are not part of the scope of
current tax legislation.
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Corresponding author
Asheer Jaywant Ram can be contacted at: Asheer.Ram@wits.ac.za
Appendix 1 Taxation of
the Bitcoin
237
Figure A1.
Correspondence
analysis sheet
26,2
238
MEDAR
Figure A1.
Appendix 2
Categories Overall Dimension 1 (x-axis) Dimension 2 (y-axis) Dimension 3 (z-axis)

Rows Mass Quality Inertia (%) Co-ord Sqcorr Contribution (%) Co-ord Sqcorr Contribution (%) Co-ord Sqcorr Contribution (%)
R1 0.084 0.033 3.00 0.077 0.018 0.20 0.064 0.01 0.10 0.048 0.005 0.10
R2 0.049 0.885 8.50 0.693 0.299 7.40 0.089 0.004 0.20 1.151 0.582 28.60
R3 0.06 0.44 3.00 0.443 0.419 3.70 0.063 0.007 0.10 0.098 0.014 0.30
R4 0.045 0.89 2.50 0.48 0.456 3.30 0.086 0.012 0.10 0.549 0.422 6.10
R5 0.076 0.32 4.00 0.206 0.088 1.00 0.327 0.178 3.20 0.192 0.054 1.20
R6 0.035 0.719 5.80 0.848 0.467 7.90 0.333 0.058 1.50 0.65 0.195 6.60
R7 0.055 0.971 24.3 1.799 0.795 56.10 0.044 0 0.00 1.007 0.176 24.90
R8 0.08 0.387 7.50 0.254 0.074 1.60 0.534 0.264 8.90 0.244 0.049 2.10
R9 0.084 0.52 3.30 0.403 0.444 4.30 0.171 0.063 1.00 0.08 0.012 0.20
R10 0.088 0.625 5.20 0.355 0.229 3.50 0.406 0.24 5.70 0.348 0.156 4.80
R11 0.08 0.63 5.80 0.566 0.479 8.00 0.094 0.011 0.30 0.364 0.14 4.70
R12 0.043 0.572 1.70 0.318 0.271 1.40 0.101 0.022 0.20 0.383 0.279 2.80
R13 0.034 0.402 2.10 0.097 0.016 0.10 0.29 0.118 1.10 0.465 0.267 3.30
R14 0.093 0.958 17.10 0.201 0.024 1.20 1.404 0.933 72.40 0.054 0.001 0.10
R15 0.094 0.596 6.20 0.102 0.017 0.30 0.371 0.182 5.10 0.583 0.397 14.20
Table AI.
traits
Statistics for Bitcoin
239
the Bitcoin
Taxation of
26,2
240
themes
Table AII.
MEDAR
Statistics for taxation

Appendix 3
Categories Overall Dimension 1 (x-axis) Dimension 2 (y-axis) Dimension 3 (z-axis)

Columns Mass Quality Inertia (%) Co-ord Sqcorr Contribution (%) Co-ord Sqcorr Contribution (%) Co-ord Sqcorr Contribution (%)
C1 0.044 0.943 9.20 0.153 0.012 0.30 1.494 0.925 38.70 0.128 0.006 0.30
C2 0.065 0.627 6.70 0.687 0.492 9.60 0.035 0.001 0.00 0.427 0.134 5.20
C3 0.1 0.544 4.70 0.464 0.496 6.80 0.001 0.000 0.00 0.172 0.048 1.30
C4 0.094 0.449 2.10 0.297 0.429 2.60 0.045 0.008 0.10 0.059 0.012 0.10
C5 0.043 0.534 1.90 0.413 0.409 2.30 0.216 0.089 0.80 0.145 0.035 0.40
C6 0.114 0.406 2.00 0.031 0.006 0.00 0.128 0.082 0.70 0.267 0.317 3.60
C7 0.102 0.531 6.60 0.064 0.007 0.10 0.498 0.334 10.00 0.399 0.189 7.20
C8 0.062 0.964 8.00 0.128 0.013 0.30 1.175 0.917 33.50 0.239 0.034 1.60
C9 0.043 0.947 21.10 1.929 0.828 50.90 0.161 0.005 0.40 0.852 0.114 14.00
C10 0.047 0.824 4.70 0.81 0.71 9.80 0.224 0.044 0.90 0.304 0.071 1.90
C11 0.017 0.305 3.20 0.169 0.017 0.20 0.773 0.286 4.10 0.053 0.001 0.00
C12 0.05 0.267 2.10 0.166 0.069 0.40 0.206 0.085 0.80 0.251 0.113 1.40
C13 0.073 0.553 6.60 0.164 0.032 0.60 0.453 0.196 5.90 0.621 0.325 12.40
C14 0.095 0.426 5.40 0.305 0.176 2.80 0.299 0.136 3.30 0.291 0.114 3.60
C15 0.051 0.818 15.60 0.91 0.291 13.20 0.185 0.01 0.70 1.442 0.518 46.70
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determine how to mitigate the associated risks (Kganyago, 2017).

2. Literature review, taxation themes and formulation of the research

2.1 The Bitcoin

2.2 Taxation treatment

Exchange Jurisdiction of incorporation

Coin check Japan

222  coin or stamp collections;

Assets which are not capital (revenue) in nature (IRS, 2017):

3.1 Correspondence analysis

(1) Taxation themes (column headings):

 C8: Bitcoins are subject to CGT.

Positive z-axis C13: Bitcoins should be taxed as a currency. Bitcoin as a currency

Axis and name Significant Bitcoin traits

By virtue of investing in the Bitcoin, individuals will be subject to volatility (R11).

available at: www.coindesk.com/german-central-banker-cryptocurrencies-must-be-regulated-on-

id=545 (accessed 21 July 2017).

Categories Overall Dimension 1 (x-axis) Dimension 2 (y-axis) Dimension 3 (z-axis)

Statistics for taxation

Categories Overall Dimension 1 (x-axis) Dimension 2 (y-axis) Dimension 3 (z-axis)

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222 coin or stamp collections;

C8: Bitcoins are subject to CGT.