New to bullion investing. Do i pay Tax on profits?

[Yippe-Ki-Ya]

The issue is that there is almost never any real "capital gain" present - only depreciation in fiat money - which the government forces you to use as currency and can then manipulate with inflation, which is nothing more than a TAX.
So yeh - you may think its reasonable, but nobody who understands what inflation really is would be happy to pay CGT.

The example you use of a trader has very little to do with inflation - such people buy low and sell high after a relatively short period of time by either adding some value or simply buying for under market price (perhaps from a distressed seller) and then selling at market price. In this case, it could be argued to be reasonable to pay a tax on the profit made. The tax laws already cater for this kind of case and the person would be seen as a trader and the profit would be seen as income, not a capital gain anyway.

Hang on, inflation is running at about 3% p.a. so any gain that is more than 3% p.a. can't be due to the simple effect of inflation.

I'm not a trader, but I bought some silver 18 months ago for about $19/oz and this week its worth about $35. If I sold it today, I'd have made an 85% return on my investment (about 60% p.a.).

60% p.a. is more than 3% p.a.

Now, I wish I had $20 million in capital to make my living buying stuff, holding it for a while and then selling it, but even if I did I'd still expect to pay tax on the profits I made (and I know people who do make their living this way who do very nicely with their deals).

Its not like wage earners don't have to keep negotiating pay increases to keep their "real" salary in line with inflation either. Everyone has to deal with the effect of inflation, regardless of whether they're trading assets or earning a salary.

I understand where you're coming from, but the official inflation rate or CPI is a joke. Everything i need to pay for - including government charges - generally go up by much much more than CPI. Basically CPI is a croc invented by government in order to make the effect of inflation look far far less than it actually is. Anybody paying real world prices can tell you that CPI is baloney!

While on the topic, take a look at this link - it illustrates what Cap Sparow is saying quite well about CGT - using PMs as an example.

http://www.safehaven.com/article/17108/hidden-gold-taxes-the-secret-weapon-of-bankrupt-governments

 

[Big A.D.]

I understand where you're coming from, but the official inflation rate or CPI is a joke. Everything i need to pay for - including government charges - generally go up by much much more than CPI. Basically CPI is a croc invented by government in order to make the effect of inflation look far far less than it actually is. Anybody paying real world prices can tell you that CPI is baloney!

I wouldn't call the official CPI figure a "joke" but I agree it isn't necessarily the best way to calculate the increase in the cost of living (which is probably a more relevant figure for most people).

Some stuff has actually gone down in price recently, so that offsets the increase in price of other things. Electricity prices have gone up recently and everyone is very aware of the increase, but are people then taking into account the fact that computers, whitegoods and milk are cheaper than they were last year?

Whatever figure you care to use - CPI, basket of groceries, etc - that figure represents the average for everyone, so it doesn't matter if you're a wage earner or an asset trader. In fact, if you've got enough money to trade high-value assets for a living, you're probably more able to afford an increase in the cost of living than some poor shmuck getting a weekly paycheck. If you do a deal and make a profit, expect to hand over a portion of it to the government to spend on schools and roads and hospitals and stuff.

 

[capt.sparrow]

While on the topic, take a look at this link - it illustrates what Cap Sparow is saying quite well about CGT - using PMs as an example.

http://www.safehaven.com/article/17108/hidden-gold-taxes-the-secret-weapon-of-bankrupt-governments

yes, this certainly does show by way of extreme example how the government benefits from inflation using one of its newest weapons of mass wealth theft - "capital gains tax".
This kind of tax was only invented in the last twenty odd years and was specifically designed to prevent astute investors from hedging themselves against the inflation tax.
By way of comparison, income tax is a little bit older - less than 100 years old in most countries, yet most sheeple now accept it as a fair tax.

Before that - government was much much smaller and ran pretty much on excise duties.

It's amazing how sheeple accept the ever encroaching expropriation of private property by governments. Now many regard the relatively new CGT as "fair".
I wonder what's the next tax that will be used to shorn the sheeple? oh yes - now i remember - a tax on carbon!
And next we'll probably have a UFO tax to protect the citizens of the planet from possible aggressive alien attack!? Anybody noticed how the subject of UFOs and aliens etc have started to make a subtle comeback? Keep your ears peeled sheeple - and be ready to be shorn further.

 

[Big A.D.]

This kind of tax was only invented in the last twenty odd years and was specifically designed to prevent astute investors from hedging themselves against the inflation tax.

No, it was designed to prevent rich bastards who earn enough to live on by trading high value assets from not paying any tax at all.

Are you seriously saying that someone like James Packer who can not only preserve his wealth but increase it substantially by buying and selling expensive things like newspapers and casinos shouldn't pay any tax on the money he makes doing that?

 

[projack]

I'm not a trader, but I bought some silver 18 months ago for about $19/oz and this week its worth about $35. If I sold it today, I'd have made an 85% return on my investment (about 60% p.a.).

60% p.a. is more than 3% p.a.

The problem with CGT is punishing winners, but do not compensate losers.
Also prevent you to take profit and jump back to the same investment few months later.
I just do not understand how you can you not to feel ripped off if you take your $27 return from silver after CGT paid, invest it in gold and not to feel 20% worse off, specially if gold price drops a few hundred dollars 3 months later?

 

[capt.sparrow]

This kind of tax was only invented in the last twenty odd years and was specifically designed to prevent astute investors from hedging themselves against the inflation tax.

No, it was designed to prevent rich bastards who earn enough to live on by trading high value assets from not paying any tax at all.

Are you seriously saying that someone like James Packer who can not only preserve his wealth but increase it substantially by buying and selling expensive things like newspapers and casinos shouldn't pay any tax on the money he makes doing that?

Not sure if you had a look at the link Yip provided but I found it quite helpful in illustrating my point at how CGT can be used to steal a large portion of anything, eg Precious Metals which has undergone no real increase in value, as i believe an ounce of gold or silver pretty much retains its average buying power throughout history.
Nonetheless, looking at the example presented - under the coming high inflation which is a forgone conclusion, i just hope that you'll still be willing to give up what will effectively amount to close to half of your stack in "capital gains tax" ... because in the coming shtf scenario - anybody who has the foresight to attempt to preserve their wealth by buying gold or silver - which includes YOU - will be regarded as a "rich barstad" by the mobs of sheeple who will lose close to everything they own in the coming financial crises.

Hope you're still happy then to give away close to half of everything you own in CGT.

Even if you are happy to do that, dont expect others to be as naive ...

 

[projack]

You have to pay taxes on every bump, but absorbed loses in every dip

Basically you have to make business decisions on taxations and not on your investment fundamentals

 

[renovator]

You have to pay taxes on every bump, but absorbed loses in every dip

Basically you have to make business decisions on taxations and not on your investment fundamentals

Well said projack you need to weigh up the tax before you invest IMO or have a good minimisation strategy