Getting paid in bitcoin

Here in Finland the tax authority (called Vero) keeps very close tabs on everyone's income. Banks report loan amounts and interest on savings directly to Vero. And Americans are usually shocked to find that everyone's earnings are publically available - that's right: provided you speak Finnish you can look up how much your neighbour claimed to Vero that they earned, and how much tax they paid (and subsequently you can shop them in to the authorities if they bought sports cars and foreign holidays whilst declaring a low income).

Let's forget about clandestine payments for a moment (in any case they are trickier than the media seems to think, and company accounts are in any case transparent up here).

So, if people start getting paid in bitcoins, what are the Finnish tax authorities going to do? Presumably they're going to demand that

• Bitcoin amounts earned are declared along with the euro to bitcoin rate on the date of payment
• Income taxes are paid on that amount
• When bitcoins are converted to euros, any profits are taxed at capital gains rates
• And alternately, any losses can be offset against other tax payments

But what happens if the bitcoins are never converted to euros, and are used to purchase goods instead? Someone might be paid 100 BTC today, at 100 EUR/BTC, and use them in 5 years time to buy a high performance sports car if the new rate is 10,000 EUR/BTC at that point. And Vero are going to want their share of the profits...

The only feasible solution I can see is for governments to move away from income tax and capital gains taxes, to a purely "value added tax" or "sales tax" approach, with different rates for essential goods such as staple foods (sales tax free?) and 50 foot yachts (50% 90%).