Israeli taxman looking BitCoin over

The Israeli taxman may be putting the cart in front of the horse if he tries to tax transactions in the virtual currency Bitcoin, given that the country has yet to recognise the virtual cash as an official currency, but he’s looking the possibilities over, according to a report this week in the business publication Globe.

The Israel Tax Authority’s interest is yet another illustration of the growing influence of the virtual currency, and its possible impact on transactions where a profit can be realised, which should therefore be taxed, according to tax officials.

“We cannot ignore this phenomenon which one way or another involves financial transactions and therefore we are examining its importance,” an Israel Tax Authority source told Globe.

Jonathan Rouach, CEO at Israeli bitcoin exchange Bits of Gold says that he is talking to the tax authorities in the hopes of helping to shape future regulations.

Ron Gross, the Tel Aviv-based founder of crypto-currency portfolio tracking software BitBlu, told Globe that an official position on Bitcoin would be a good thing, keeping honest transacters within the law and legitimising the virtual currency.

Globe points out that there is uncertainty in the market regarding Bitcoin, with some banks ambivalent in policy and others embracing it, and the publication reported that the Israel Bar Association has opined that Bitcoin is on the way to gaining acceptance as a means of payment for lawyers.

However, formal regulatory bodies have mostly ‘pleaded the fifth’ regarding bitcoin, Meni Rosenfeld, founder of exchange Bitcoil, said. “There has hardly been any clear statement or action from them.”

Globe reports that interested parties in Israel have formed a local chapter of the Bitcoin Foundation to exchange views, with up to 160 attendees at meetings, and that growing numbers of Israeli retailers are starting to accept the virtual currency.

However, banking involvement is needed, said Gross:

“We need at least one commercial bank to let go of its fear of progress, and start innovating in regards to bitcoin. Fidor Bank in Germany decided to partner with the German exchange,” he said, arguing that its stocks subsequently rose. “There is a lot of potential here.”

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