There’s been a lot of talk about crypto tax cheats over the last few years, and according to a new report by the International Monetary Fund (IMF), the problem doesn’t end with anti-money laundering laws. The organization feels more steps are needed if things are going to come to a complete stop.
The IMF Details Crypto Tax Evasion
The big concern is that crypto is primarily being used by illicit players who garner money that’s not theirs (or that stems from illegal transfers or activities) to launder funds. The fiat arrives in one’s hands, and then they use a crypto mixer or similar tool to hide the profits, none of which are ever reported on their tax returns. It’s money laundering and tax evasion rolled up into one big, combinatory ball of filth and criminality.
The IMF report includes a disclosure saying that while this is simply an opinion, there are allegedly tens of billions of dollars out there going unreported on tax forms that support the authors’ claims. The individuals who wrote the report say they’re not there to provide policy ideas regarding what to do next. Rather, they’re there to shed light on the illicit goings-on and to guide present laws in new directions. They said:
Whether crypto withers or blossoms, the tax system still needs to deal with it. The first step for governments, nonetheless, is to apply AML rules and third-party reporting requirements where they can.
The paper does say that certain things have changed “for the better” over the past couple of years. For example, it’s estimated that a global 20 percent capital gains tax initiated in 2021 was responsible for the reporting of an additional $300 billion in crypto-related transactions.
Still, the IMF authors say present know your customer (KYC) tactics just aren’t doing the jobs they should be doing, and they’re not enough to put everyone on an honest path. The authors write:
KYC rules might enable the authorities to know, for instance, that some individual cashed out a certain amount of cryptocurrency, but from the transactions prior to that recorded on the blockchain it will not be possible, without further information, to identify any associated capital gain or loss.
Use the Blockchain?
One of the things they suggest is the blockchain (which supports all the world’s digital currency transactions) be directly utilized by tax authorities given how transparent it can be. The blockchain is designed to share information in real-time, thus allowing users and practically anyone from around the world to look at the information contained therein anytime they wish. The writers said:
Overcoming pseudo-anonymity is the core problem that tax administrations are now trying to address. In the old days, the tax authorities’ problem was that it knew who you were, but not your income.
