Contrary to the headline at Coindesk, this is not a “proposal” from the Ministry, but rather how they see existing law.
And they think that none of the exceptions in the law right now apply to bitcoins.
If that is true, merchants would need to pay VAT of 19 percent on the bitcoins they collect from their costumers as payment. That would be a massive disadvantage for bitcoin in competing with other payment options, none of which have this problem.
It may well be true that, as the Ministry says, right now the exceptions in the law do not apply. But obviously they should apply. As far as bitcoins are used to pay for some goods or service, they function just as traditional currency. And the Bitcoin protocol was designed and is used as an alternative to traditional currency.
There is no good reason for discriminating against bitcoins in this way. That point is important, since legislation is not allowed to discriminate without good reason under German Constitutional law (Article 3).
The answer from the Ministry does not explain any such good reason. It can’t, since there is none.
If there is a need to change the law to avoid this unconstitutional discrimination, eventually such a change should be enacted. As long as that is not the case, Article 4 Number 8 b) of the Value Added Tax Act should be applied by analogy.