France wants to tax unrealized gains on Bitcoin
A proposal for the taxation of unrealized gains is currently causing controversy in France. The focus is particularly on the potential burden on volatile assets such as Bitcoin. A morally questionable measure that puts Bitcoin holders at a considerable disadvantage. The French government seems to want to collect profits without sharing the associated risk. But how realistic is the implementation of this plan?
The draft law in detail
On November 16, 2024, the French Senate presented a proposed amendment (Amendment I-128) as part of the budget negotiations for 2025, which provides for the introduction of a tax on so-called "unproductive capital gains". These are gains that exist on paper - for example through price increases in Bitcoin or other assets - but have not yet been realized and converted back into euros, for example. Simply put, such gains arise when the value of an asset increases but it is not sold.
The amendment aims to significantly expand the tax base of the wealth tax (IFI). In addition to real estate, which previously formed the sole basis of the tax, digital assets such as Bitcoin and liquid assets in bank accounts are now also to be included, provided they do not contribute to economic activity. This particularly affects assets that are considered "unproductive", such as luxury goods like yachts or substantial cash reserves that are hoarded without the intention of investing. At the same time, an increase in the exemption limit from 1.3 to 2.57 million euros is proposed in order to relieve households that have become liable to pay tax due to inflation. The amendment also provides for tax incentives for economically productive investments, such as the construction of rental apartments or support for small and medium-sized enterprises (SMEs).
Criticism of the project
Proponents argue that book profits already offer economic advantages and can therefore be taxed "fairly". However, with highly volatile assets such as Bitcoin, the reality is often different: price gains can turn into losses within a matter of days or hours. In an emergency, such a tax could force investors to liquidate their assets at an unfavorable time just to cover the tax burden.
Another point of criticism is the fundamental question of fairness: the French government seems to be focusing on taxing profits without compensating investors in any way for the risk they take. Investors should therefore be asked to pay in the event of success, while in the event of losses they go away empty-handed and bear the full risk themselves - a highly asymmetrical approach that is not only morally questionable, but also economically risky.
The proposal to tax unrealized gains is a prime example of how misguided political measures can jeopardize confidence in the financial market, but also in one's own government. France would do well to support investors and savers instead of burdening them with unfair tax plans. A French bitcoiner commented on this when asked:
'To be honest, I'm just fed up with our government. They can't manage to finally reduce spending and therefore keep coming up with new taxes.
When is the tax coming?
Even if it is sometimes suggested, particularly in the social media, that the tax on unrealized gains is already a done deal, it is highly questionable whether it will come at all. The French legislative system stipulates that such proposals still require the approval of the National Assembly after a vote in the Senate in order to become law.
Although the senators present at the recent meeting voted in favor of implementation, the National Assembly has the final say. Historically, however, similar amendments have regularly been rejected in the past. The chances of implementation are therefore rather slim. However, the political landscape in France is increasingly volatile, so surprises cannot be ruled out.
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