Here in my country which is now an upcoming tiger economy (though we are still classified as a third-world country), we are free to participate in Bitcoin both buying and selling as the government is treating Bitcoin just like any other foreiign money.
However, I am sure that only a very, very small fraction of us are declaring our Bitcoin income. It seems to me that the government is not that interested to get strict with individuals as long as they can tax the Bitcoin exchange provider for the service rendered.
I am then wondering the situation with other countries. Can your government really be able to track if you never declared gains made from Bitcoin transactions?
In my own understanding about taxation thru local exchanges in which it will always depend on how much Bitcoin you will going to convert to fiat therefore no need for income declaration because once you convert a certain amount of Bitcoin to fiat then the Bitcoin tax was already included together with the service charge which is the same regulation policy with other countries including ours.