Kassym-Jomart Tokayev, the president of Kazakhstan, the third largest mining country, recently signed a tax reform bill to raise electricity tax rates for cryptocurrency miners by up to 10 times.
Kazakhstan introduced a special tax system for the cryptocurrency mining industry on January 1, requiring miners to pay a tax based on their actual electricity consumption, with a levy of one tenge (about $0.002) for each kilowatt-hour of electricity consumed.
As for the Kazakh government’s tax reform this time, it is to distinguish different intensity of electricity consumption groups, so as to formulate individual appropriate mining tax rates.
The rate will be based on the average cost of electricity for miners during the tax period, which will vary by region:
Based on the electricity cost of 5-10 tenge per 1 kilowatt hour, the tax rate is 10 tenge based on the electricity cost of 10-15 tenge per 1 kilowatt hour, the tax rate is 7 Tenge based on the electricity cost of 15-20 tenge per 1 kilowatt hour, the tax rate is 5 tenge based on the electricity cost of 20-25 tenge per 1 kilowatt hour,
Tax rate: 3 Tenge calculated at the cost of electricity exceeding 25 tenge per 1 kilowatt hour, tax rate: 1 tenge per 1 kilowatt hour for miners using renewable energy, regardless of the cost of electricity.
The new tax rules, which will take effect on January 1, are expected to balance the load on the grid and curb overconsumption of domestically produced electricity by mines, according to official statements.
After China cracked down on cryptocurrency mining in May last year, miners began moving to neighbouring Kazakhstan in droves, causing domestic power shortages due to surging demand for electricity and forcing them to restrict power supplies and close mines during the cold winter months.
Several Bitcoin mines have already been forced out of Kazakhstan amid rising taxes and power shortages.