Four proposed tax amendments that would benefit cryptocurrency owners and investors have been rejected by the French Parliament.
The tax amendments were posed as part of France's 2019 budget planning. They included a proposal to distinguish between occasional and frequent cryptocurrency trading, plans to only apply tax once balances have been transferred to a bank account, and tax exemptions.
Pierre Person, MP for centrists La République En Marche, argued in the "Assemblée Nationale", France's lower house of parliament, for a clarification on the classification of frequent and infrequent trading which currently determines how taxes are applied. This was rejected by the "rapporteur," or budget chair, and the French finance minister Bruno Le Maire on the basis such an amendment "would only confuse the situation rather than clarify it."
Person proposed that taxes on cryptocurrencies only be applied when balances reached the "real economy," such as when they were transferred into conventional bank accounts. He was supported by Laure de la Raudière, one of two MPs who recently advocated for the French government to channel over $500 million in government spending to blockchain development efforts. De la Raudière proposed a separate amendment for a similar purpose.
Person, along with La République En Marche MP Éric Bothorel, also proposed an annual tax exemption above the currently applied €305 (roughly $346). The MP's submitted exemption figures of €3000 and €5000 respectively (approximately $3410 and $5685), both figures were rejected as "excessive demands."
French Republican MP Éric Woerth proposed that cryptocurrency capital gains be taxed under France's existing system for securities. It was also returned but qualified by a promise to re-evaluate the amendment should crypto-assets become a greater part of the French economy.
Alexandre Stachtchenko, president of blockchain lobbying group La Chaintech, responded to the rejections in an interview with Capital magazine:
"The most frustrating thing about all this is that none of the rejections were motivated or justified by the Chairman or the Minister."
Though the amendments would certainly benefit cryptocurrency investors and traders, some of the rejections are hardly surprising. It would be far easier to only tax cryptocurrency balances once they enter the "real" economy, but in theory traders could avoid tax by keeping their balances within the cryptocurrency markets for some time.
Thousand-dollar equivalent exemptions are also unlikely to be accepted. Though the French government is supportive of cryptocurrencies it's unlikely to want to miss out on valuable tax revenue from the sector.
Currently cryptocurrency profits are taxed as capital gains, equivalent to those from "movable property" in France, according to whether trading activity is occasional or habitual. For many this equates to 19 percent income tax and 17.2 percent social contributions, a total of 36.2 percent. The classification of cryptocurrencies as "moveable property" was considered a tax break for investors earlier this year. Cryptocurrency holdings are also included in wealth tax calculations.
Many in France hope to create a welcoming space for cryptocurrency and blockchain activity so the parliamentary debates are likely to continue. In September 2018, the French Parliament did progress the PACTE Act creating a legal framework for ICOs.