Digital currency has been gaining popularity in the media lately, and now, it seems that government tax institutions are attempting to impose taxes on the growing sector of crypto-finance. With a market cap in the hundreds of billions of US dollars, none of which is going to the tax man, digital finance continues to be a lucrative industry.
The US Wants Complete Control
A recent report from the US Revenue Service showed that very few people are declaring any of their earnings or revenue generated by their cryptocurrency. In fact, less than 100 people out of 250,000, a meager 0.04%, who filed their taxes with Credit Karma, declared their cryptocurrency transactions to the IRS.
This situation did not come as a surprise to Jagjit Chawla, Managing Director of Credit Karma. However, he hopes to see more declarations on 2017’s tax returns since it was such a profitable year for the industry.
Still, since 2014, the IRS has set up a special section on tax forms for declaring earnings with cryptocurrency. They, therefore, have classified the sale, purchase, trade or mining of digital currencies are an activity that is subject to taxation.
Moreover, this isn’t just the case in the USA. In India, a few months ago, the government witnessed the same situation and had to issue a warning to its citizens to declare their earnings.
The reminder was announced by Sushil Chanda, the Chairman of the Central Board of Direct Taxes (CBDT). Over 100,000 warnings were issued and at the center of each was the threat of being guilty of tax evasion.
A Show of Force
According to the information that was made public, the decision was made after an investigation by the government of New Delhi. The investigation focused on several major exchange platforms and resulted in a declaration of widespread tax evasion in the field of cryptocurrency. According to Chanda, “We discovered that there weren’t many declarations about cryptocurrency investments, which means people simply aren’t declaring their earnings. Therefore, we have now informed all the DGs in India and have issued warnings that cryptocurrency earnings are subject to taxation.”
He went on to explain that the study was carried out to determine how widespread tax evasion was in the country. It seems that nearly 100,000 cryptocurrency investors have been issued warnings and have been threatened with tax evasion. In their warnings, the government declared that they would be imposing taxes on earnings by any force necessary. A decision made by a state which seems to be a first in the world of crypto-finance.
“We have sent notices and warnings to all investors who haven’t declared their earnings because we believe that it is all taxable income.” Said Chanda. The only question is how the government will forcibly impose this taxation since cryptocurrency users typically benefit from the anonymity of Blockchain technology.
India Not in Favor of Cryptocurrency
By March 31st of this year, India plans to release a series of reports conducted by the government regarding the use of cryptocurrency in the country. Still, with the widespread tax evasion that’s recently been uncovered, the country’s stance on cryptocurrency is becoming clear. According to India’s Secretary of Economic Affairs, the country will soon take drastic measures that will simply make the use of all cryptocurrency illegal.
It’s important to note that India is not the first country to take drastic actions against the industry. Long ago, China imposed restrictions and banned the use of digital currency within its borders. It is these types of decisions that have a major impact on the value of cryptocurrencies, of which, Bitcoin is still leading the charge.
For experts like Brandon William, more than just tax evasion, there is another problem. According to him, the problem is also that it is difficult to precisely declare earnings or losses related to cryptocurrency. Williams believes that for investors who make only 2 trades per day, they would need to take a minimum of 2 to 4 hours per week to properly declared gains or losses.