3 ms·
What is the mechanism for “crypto assets to avoid tax?”
by adolph 3y ago
What is the mechanism for “crypto assets to avoid tax?”
- e12e 3y agoGet paid in crypto, don't tell the government? Don't collect/pay VAT nor tax on profits? Ed: or as a contractor/consultant - don't pay social security nor income tax?
- adolph 3y agoI don't see how "cypto asset" are different from any other kind of payment. For example, if you are an employer and you pay in crypto, do your reporting requirements suddenly evaporate simply because the method is not a check?
- e12e 3y agoNo, it's illegal - it's just less visible (wage theft/tax evasion is also easier with cash only businesses). Transactions don't go through regulated banks, with reporting requirements, for example.
- csomar 3y agoExcept for people who profited from the rise and cashed their profits on a foreign land, nope, crypto is not really good to avoid taxes. That and you eventually need to bridge with the traditional monetary system and suddenly crypto is worse than most alternatives out there. The thing is, crypto exchanges somehow are not banks and thus are not "technically" subject to CRS. This is kind of a CRS for crypto exchanges. In reality, these laws are made to control money flows and not to improve taxation (the big corporations still avoid taxes and rich people still use expensive lawyers to nullify their tax bill). This will make the business environment for the average person worse. Which, surprise, might push people to actually use crypto as a medium of value transfer instead of speculation. Just hang in there and watch.
- adolph 3y agoBackground on CRS in case someone has the same question I did: The Common Reporting Standard (CRS) is an information standard for the Automatic Exchange Of Information (AEOI) regarding financial accounts on a global level, between tax authorities . . . The idea was based on the US Foreign Account Tax Compliance Act (FATCA) implementation agreements and its legal basis is the Convention on Mutual Administrative Assistance in Tax Matters (MCAA). 120 countries have signed the agreement to implement, and the MCAA remains open for more countries to adopt. https://en.wikipedia.org/wiki/Common_Reporting_Standard https://en.wikipedia.org/wiki/Common_Reporting_Standard
- sowbug 3y agoNone beyond what anyone could already avoid with cash. Like SAR, it's a pretext to criminalize privacy.
- PeterisP 3y agoThere are two rather popular mechanisms. One is simply using crypto as cash equivalent - a mechanism to receive (and spend) undeclared income without paying the relevant taxes, so that drives adopting pretty much the same regulations as for cash, just as there already are various requirements to declare and deanonymize large cash transaction, the same gets implemented for various crypto-assets. The other is using NFTs (or similar products) for money laundering, again in pretty much the same way as physical art can be used; the key steps being (a) cheaply buy or make some asset-with-undefined-value; (b) have an "anonymous customer" (your own 'sockpuppet') buy it from you at a high price using cash or cryptocurrency. This can be both a form of partial tax evasion, as the capital gains tax you'd pay on this profit is often much lower than what you'd pay otherwise for that income, and also a form of money laundering, if the funds are obtained, for example, from some scam or ransomware operation. And again, the general solution here is to apply the same regulations as for large quantities of cash, such as requiring to identify the counterparty and thus make the potential laundering traceable.
- kkielhofner 3y agoThis money laundering approach also has an additional potential (almost certainly illegal) tax upside. The sockpuppet that buys from you can sell it downstream at a greatly reduced price to another sockpuppet (or back to you) and report it as a loss offsetting other reported income while the cycle repeats. Obviously anyone involved in this can loop and repeat this any number of ways for a variety of preferred outcomes. Awww shucks, I just made a bad investment and got "unlucky" this time... I think there is an analysis somewhere that more-or-less proves this is exactly what Lindsay Lohan did via NFTs. Not new to NFTs or crypto at all but it is much easier and far more nebulous when ugly JPGs of Apes were "trading" in the hundreds of thousands of dollars.