Stephen Donnelly (Wicklow, Independent)
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126. To ask the Minister for Finance if his attention has been drawn to the growing use of crypto-currencies such as Bitcoin; if he has concerns regarding the legality of using such currencies as de facto legal tender in any transactions in this jurisdiction; if he has any concerns regarding the use of such currencies to circumvent taxes and any potential loss to the Exchequer as a result; and if he will make a statement on the matter. [52492/13]

Michael Noonan (Limerick City, Fine Gael)
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I have been informed by the Central Bank that it does not regulate Bitcoin. Crypto-currencies are not legal tender in the Euro area. The Revenue Commissioners have advised me that e-commerce, including the use of virtual currencies, present a challenge to tax administrations throughout the world. Specifically, regarding the possible use of crypto-currencies (including Bitcoin) to circumvent taxes, the Revenue Commissioners and tax administrations in other countries are actively monitoring developments. Because Bitcoin is a combination of some factors that constitute a commodity and some that constitute a currency, the implications for taxation are varied.

If Bitcoins are received as payments in commerce, then the same rules in place for payments received in other foreign currencies also apply. If speculation on Bitcoin occurs, the taxation rules that would apply to any gain are applicable. More specifically, VAT is generally chargeable on the total consideration for goods and services, including all taxes, commissions, costs and charges (excluding the VAT chargeable in respect of that supply). This general rule is based on the EU VAT Directive. Where the consideration does not consist of, or does not consist wholly of, and amount of money, VAT is chargeable by reference to what might reasonably be expected to be the open-market price of the good and services supplied. The VAT Regulations require that the amount of tax included on an invoice is expressed in Euro. The exchange rate to be used for non Euro currency transactions is either the latest selling rate for the foreign currency recorded by the European Central Bank or alternative method of determining the exchange rate that is agreed with the Revenue Commissioners.

More broadly, I am advised that shadow economy activity has always been attracted to cash businesses, in large part because of the difficulties in traceability and record keeping. Bitcoin may present a cash substitute for some tax evaders. While it has the potential to increase instances of non-compliance, I am advised that, currently, the threat posed to the Exchequer is likely to be small. It is probable too that for some evaders, it represents a new opportunity for existing non-compliance, rather than a new form of evasion.