There is a lot of misinformation in this thread regarding the legality of avoiding taxes. Given that there are 21 pages on this thread regarding the subject, I am sure what I am about to say has been said before. The last thing that I want is to see any bitcoin supporter go to jail for tax evasion, so I will reiterate what I know to be true.
(I am basing my response off of the United States Tax Laws, however, this will likely apply to most other countries as well.) YES, you do have to pay taxes on cryptocurrency! Cryptocurrency has some uncertainty whether or not its to be treated as a currency or a commodity... but one thing is certain, it is certainly considered a capital asset.
As we all know, the price of cryptocurrency certainly can fluctuate. Now one huge misconception is that if you hold on to a cryptocurrency that goes up in value, your going to have to pay huge amounts of taxes if you end up filing taxes while the price is high. The obvious fear there would be that if you pay taxes at a high evaluation, then the price lowers before you sell it, you would be paying taxes on unrealized gains.
The only taxes that an individual is expected to pay is on realized gains. In order to file taxes, you must keep track of the following:
1) The date, amount, and cost/price of every time you have bought the cryptocurrency
2) The date, amount and price of every time you end up selling the cryptocurrency.
Using this information, it is possible to determine the actual realized gains. If the sale of the cryptocurrency comes less than a year after the purchasing date, then it is taxed as income (a much higher rate). If you have held on to the cryptocurrency for longer then a year, the gains are taxed at a much lower rate.