Kassym-Jomart Tokayev, the President of Kazakhstan, signed a bill into law that makes amendments to the Tax Code of the country in order to charge a higher tax rate from those engaging in crypto mining activities. The tax will depend on the average cost and amount of electricity consumed in the mining process of cryptocurrencies like bitcoin.
Higher taxes for miners
A new piece of legislation was recently signed into law by the Kazakhstan president that makes changes to the ‘On Taxes and Other Mandatory Payments to the Budget’ law of the country. It will also make amendments to the supplementary law that enhances the Tax Code’s implementation. The purpose of the amendments is to introduce different tax rates applicable to crypto mining.
The exact levies will be calculated depending on the average price of electricity that is used for crypto mining in a certain tax period. The tax starts as low as 1 Kazakhstan tenge for every kilowatt-hour (kWh), which will be applicable if a crypto miner has consumed about 25 tenge worth of electricity or more. The tax can go as high as 10 tenge if the consumption of electricity is in the range of 5 to 10 tenge.
The lowest tax would be charged to crypto miners who use the electricity generated from renewable resources, which will be about 1 tenge for every kWh, no matter how much electricity is consumed. The Central Asian country introduced the taxes on January 1st of the year after it had seen its power deficit rise in the previous year.
Crypto miners had been held responsible for the shortages in electricity, as there had been a massive influx after China had decided to crackdown on the industry last year in May.
Reducing load on the power grid
Previously, the government had tried to restrict crypto mining as well, as they imposed limits on the supply of electricity during the cold winter months. The crypto mining facilities in the country had been shut down during this period. Due to these measures, some of the companies decided to relocate to other areas and some even moved their equipment out of Kazakhstan.
President Tokayev had issued an order in February to locate and identify the crypto mining entities operating in Kazakhstan and to increase their taxes. State auditors had cracked down against mining operations back in April, which had been exploiting tax benefits that were not meant for them.
It was then that the government announced its intention of increasing the tax burden on cryptocurrency miners. One of the proposals that were made initially involved taxing crypto miners based on the value of crypto they mine. Official statements have said that the purpose of introducing the new tax rules is to balance the load on the power grid. This is because these measures would help discourage the use of electricity produced domestically for the purpose of mining.
Kazakhstan is not the only country that wants miners to switch to renewable resources, many others are encouraging the same.