dear taxman i have x% of my money in bitcoin and have not been paying my taxes, i am declaring this on public forum that a lot of you 3 letter agencies are watching so you can come after me and screw me over. thanks for your services. <3
I suppose it depends on your jurisdiction or your willingness to participate in evasion. Bitcoin is not an interest bearing instrument, so there are no taxes to be paid on interest. If I buy something with BTC, the merchant will slap sales tax on the cost of the purchase. If I exchange my BTC for fiat, I may or may not be liable for capital gains tax. Taxes paid or not applicable.
As far as I know, the bitcoin you are holding now, regardless if you earned it, is not yet taxable if it is in bitcoin form. At the moment you convert it into fiat, then that money is then taxable. Correct me if I am wrong, I just read this information weeks ago from this forum.
I agree that we also pay taxes if we purchased something from a merchant, that is if the merchant/ business is registered legally, which is called the value added tax. Bottom line, we are still paying tax in an indirect manner.