Top European tax lawyers have warned that the new digital currency for Facebook Libra will cause serious tax problems for users in Europe.
According to the financial times, The lawyers explained that the tax problem that stems from the idea of Facebook currency is that with the change in global exchange rates, the local value of the user’s Libra currency will change accordingly, resulting in gains and losses in capital, which will be achieved every time when someone use Libra to make a purchase.
“In most countries, gains are taxable, which means that consumers will have to submit detailed tax returns showing all their transactions and exchange rate at that time, and pay any tax due, so this would be a major impediment to the adoption of the Facebook currency,” said lawyer Dan Nidel.
“In the UK, for example, anyone who fills a tax certificate is expected to report the gain or loss for each transaction. In other countries, the problem will be more serious with no annual exemption from capital gains such as France, Italy, Spain and Germany” he said.
“I do not know how Facebook can promote a product to evade taxes, even a small one, or how regulators will allow it to happen,” Nidel said.
Facebook has indicated earlier that taxes are one of the problems that must be addressed with regulators and said they are waiting for local laws to be addressed, but this solution has not been appreciated by legal lawyers.
Libra is said to be specifically linked to the US dollar, and is supposed to be more resistant to the extreme volatility that has rocked the Pitcairn and other coded currencies, as there is no indication yet that Facebook will stop remittances on messenger in other countries.
Facebook payment service via Messenger, launched in 2015, was facilitated by credit card or debit card payment and through PayPal.