7 ms·

Crypto tax evasion is 'pervasive'

38 points by belter 2y ago

sealeck 2y ago
I think this is unsurpring given that the crypto userbase seems to consist mostly of speculators and criminals.
- bdcravens 2y ago
  There's also a group that's against the Federal Reserve, but that belief system tends to be congruent with the "taxation is theft" group
  - OutOfHere 2y ago
    > the "taxation is theft" group Let's be real here. With compounding, total taxation takes away 90% of income. If that's not theft, I don't know what is. There would be an appropriate level of taxation that would be fair, perhaps 10%.
    - worik 2y ago
      > With compounding, total taxation takes away >99% of income That does not compute. Perhaps you could explain that.
      - sandworm101 2y ago
        I think he was aiming for disposable income, rather than all income.
        worik 2y ago
        I think it is lies.
      - OutOfHere 2y ago
        I haven't yet checked this yet for correctness, but the approach to go about doing such a calculation is at https://chatgpt.com/share/8145329b-b009-46f6-a9cf-7703f4958875 https://chatgpt.com/share/8145329b-b009-46f6-a9cf-7703f49588... It says the answer is a 90% loss (not 99% or higher), which still is quite bad. Again, this is pending me doing the calculations myself. Regarding taxes, a total tax burden of 50% was used to account for all taxes (income, sales, property, etc.) Even this calculation by GPT doesn't take into account the "investment gain" taxes one would have to pay at the end, which would bring the loss percentage above 90.
    - bdcravens 2y ago
      Currently less than 4% of Americans save any money. To assume that any would save enough to compound instead of spend in the absence of taxes is naive.
      - OutOfHere 2y ago
        So you think the hardworking 4% should suffer like the rest of them? Even though they pay more taxes? Taxation is supposed to be fair, but your approach isn't.
        verall 2y ago
        Do you think that the minority of the population which saves money works harder than the majority that does not save money? * I think that the 4% number is dubious but it's not material to the question.
        bdcravens 2y ago
        I'm just going off of the documented personal savings rate. https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT
        bdcravens 2y ago
        It seems like you're assuming motivation where it doesn't exist. I'm simply stating that your belief that paid taxes would be compounded to 99% of income is quite a fantastic claim. Besides, there's no proof that the "hardworking" are necessarily more saving than those who aren't. Sometimes the highest earning have the highest rates of debt, ie, they don't save.
      - roenxi 2y ago
        That logic seems a bit circular. I don't endorse the 90% figure because I haven't thought about it, but for the sake of argument if you were faced with a choice where 90% of your income would be redirected away from you vs not saving it'd be expected that nobody would save. So you can't argue that lack of savings under the current system implies no savings under a low-tax system. It is pretty reasonable to suggest that a big contributing factor to the lack of savings is precisely what the tax system does to savers.
    - yuliyp 2y ago
      Yes that's entirely the point. Ideally peoples' share of wealth should go down with time. Return on capital after taxes shouldn't enable people to continue growing their wealth relative to society forever. They should have to actually do work to earn more.
      - OutOfHere 2y ago
        That's an opinion held by slavers. It most assuredly is antithetical to the opinion held by the people.
    - observationist 2y ago
      With compounding, the potential earnings of someone who is taxed but invests over 50 years of work compared to someone else that isn't taxed but does the same investments comes out to about 50% gains of the second over the first. If someone is taxed and doesn't or can't save, or their retirement gets screwed up, or they make enough to get taxed but not enough to invest significantly, or finds themselves in any of a myriad of screwy situations, then they only make 5-7% by diligently saving up the same amount that the first two would have been investing year over year. 95% of their potential income is lost by not investing reasonably. If someone were magically able to not pay taxes, they gain 150% of the good-retirement investment and taxes scenario. Given the constant nickel and diming, the gotchas, the shuffling of money back and forth, and the outsized impact on investment, I completely agree that a flat 10% absolute level of taxation, not a red cent over, would be reasonable. It's also super important to invest, and to keep dropping money into your investments over time that you never touch, just use a diverse and sensible fund, and don't pull it out until you retire. Not only is it theft of the future, it's wasted and misspent in awful ways. Sure am glad all our representatives are getting so wealthy, though. Wonderful people, that lot.
      - roenxi 2y ago
        > With compounding, the potential earnings of someone who is taxed but invests over 50 years of work compared to someone else that isn't taxed but does the same investments comes out to about 50% gains of the second over the first. It might be too complicated to say. Someone who doesn't pay income tax, maybe. Depending on assumptions. But I worked out at some point that >50% of my time spent working was being redirected towards the tax office - my income because it was taxed when I earned it (+ any stealthy payroll taxes), taxed again when it was spent and if it was invested in the middle it got taxed a third time for fake "capital gains" from money creation. When you look at government spending (typically 40-50% of GDP in the West) and consider that most of that is probably malinvestment (by lack-of-alternatives-to-tax they're taking from the most economically productive members of society) you've probably lost more than half your wealth vs a no tax society. There is friction everywhere.
- throwing_away 2y ago
  Believe it or not, there are people that think real innovation is happening in crypto, and they also make investments and pay taxes. If you search around for crypto tax software, you'll find there's actual demand from people that want to pay taxes on their crypto.
  - xienze 2y ago
    > you'll find there's actual demand from people that want to pay taxes on their crypto. I think that’s more of a “need to” thing rather than “want to”, yes even for the people that aren’t using crypto for criminal activity.
    - kreetx 2y ago
      Paying taxes overall is a "need to" thing to most, so nothing new with regarding to crypto.
- deleted 2y ago
  [deleted]
warkdarrior 2y ago
Isn't that by design? Many/most crypto schemes are designed to democratize access to money and thus they disintermediate traditional players (banks, central banks, etc.). Of course governments and tax authorities are one such traditional player, so they will be disintermediated. The government calls it "tax evasion", while the crypto world calls it a feature.
- sealeck 2y ago
  > Of course governments and tax authorities are one such traditional player, so they will be disintermediated. The government calls it "tax evasion", while the crypto world calls it a feature. Where do these people think tax revenue goes? Into a big black hole? The money goes to pay for the justice system (which protects property rights, prevents people from killing each other), build and maintain infrastructure of all kinds (roads, bridges, mass transit, sewage systems, water treatment facilities), education, etc. Without the government we'd be much, much worse off.
  - corry 2y ago
    Perhaps things aren't so binary on either side. Some people using crypto are criminals, terrorists, and (perhaps less concerning albeit more numerous) tax-evaders. Some aren't. And on the other side, some (much?) government spending is inefficient, highly-politicized, and perhaps contrary to someone's moral compass (e.g. the average American citizen sends $11.34 each year to Israel, or sends Uncle Sam a whopping $140/yr -- out of their own pockets -- to fund the 'War on Drugs' which disproportionately puts black men into prison for small amounts of personal cannabis possession). So yes, gov tax spending builds roads and defends property rights - but that doesn't mean it's all good. A reasonable person can take issue with both the size and targets of much of the spending. Anyways, my point isn't to debate the pros/cons of particular government spending examples, but rather that the average person has not just reason but also a duty to assess how government spending happens, whether or not that aligns with their values, and to vote and organize appropriately to try to change that. If you're already a bit more libertarian, skeptical of federal monetary policy, morally conflicted about how your tax dollars are spent, in tech with a love of technology, then ya you probably are going to like the fact that crypto is outside of the normal system.
scrlk 2y ago
https://archive.ph/Dk9zx https://archive.ph/Dk9zx
PretzelPirate 2y ago
And here I am being a fool paying quarterly estimated taxes on my staking income and capital gains.
- throwing_away 2y ago
  I also pay my crypto taxes. They need to replace "non-compliance" with "non-enforcement" in this article. In fact, I would love to see some of the "lol taxes" people have some enforcement action taken against them. The only reason wage-tax "compliance" is so high is because there's a system in place to automatically extract as much tax as possible and make you file a refund for the difference. I think you would find equal amounts of "non-compliance" in any cash or barter based business.
  - bdcravens 2y ago
    As do I, using Coin Ledger in years I've traded. Almost all transfers from crypto to fiat happen via exchanges and banks, and I can't imagine it would be difficult at all for the government to get their hands on a list of such ACH transactions.
    - throwing_away 2y ago
      I believe that the amount of "untraceable" crypto that exists is extremely low. Go try to buy some crypto in the US without KYC. It's already pretty tightly controlled.
- deleted 2y ago
  [deleted]
exabrial 2y ago
US Government is mad that people have figured out how to evade taxation as well as their Senators.
surfingdino 2y ago
How much of the tax evasion would disappear if we could pay taxes on crypto in crypto? The fact that the regulators scare banks away from allowing transfers to/from crypto exchanges whilst the IRS and HMRC demand taxes to be paid in USD or GBP makes the space prone to non-compliance and stifles innovation. So, either support legitimate crypto businesses and exchanges or let me pay tax on my meme coin gains in meme coin.
- sddsdd 2y ago
  Privileging USD for tax payments is a big part of why USD has value. There is zero upside to the US to allow payments in anything else.
junar 2y ago
Related: IRS requires brokers to report certain sales of digital assets beginning in 2025. https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-requiring-broker-reporting-of-sales-and-exchanges-of-digital-assets-that-are-subject-to-tax-under-current-law-additional-guidance-to-provide-penalty-relief-address https://www.irs.gov/newsroom/treasury-irs-issue-final-regula...
- wmf 2y ago
  This was a huge mistake by the IRS; they should have required this in 2013.
- panarky 2y ago
  How to they catch people who don't report their crypto capital gains in 2024?
stuffoverflow 2y ago
They estimated the average tax liability of noncompliers to be between $200 and $1087. Also wouldn't the fact that Norway requires to declare wealth in crypto no matter how small the amount likely inflate the number of noncompliers quite a bit? In most countries you are only create a taxable event when exchanging to fiat or other crypto. IMO there should be more reasonable limits to how much you are allowed to sell before being liable for taxes. The amount of time it takes to properly file crypto taxes can be multiple hours especially if you do on-chain trading and need to report every invidual shitcoin exchange and so on. I feel like a significant amount of the tax office's resources would be freed by just allowing something like 5€k a year to be sold tax free.
23B1 2y ago
Good. At this point I'd rather form my own army and build my own highways and teach my own children than pay for entrenched bureaucrats to further entrench themselves along with the powerfully wealthy.
- pornel 2y ago
  Poe's law.
deleted 2y ago
[deleted]
JohnFen 2y ago
Isn't tax evasion one of the major use cases for crypto?
- synicalx 2y ago
  I genuinely can't think of use cases other than tax evasion, and 'discrete' purchases.
  - beaglesss 2y ago
    Things may have changed, but for awhile it was the cheapest way to buy stuff online in high-risk legal markets like precious metals if you wanted the transaction to clear in under 30 minutes. CC have high fees in high risk markets, wires are expensive for some customers, ACH takes 1+ days. Crypto clears quickly and can't be reversed so some sellers discounted it significantly against credit.
- deleted 2y ago
  [deleted]
- Ferret7446 2y ago
  No...? Most crypto is pretty bad for tax evasion because the blockchain provides a permanent public record. There is pseudonymity which when done carefully can provide privacy, but crypto is primarily for digital transactions that get blocked (e.g., credit card companies banning adult content sellers).
indigo0086 2y ago
Good
1vuio0pswjnm7 2y ago
Works where archive.ph is blocked: https://cc.bingj.com/cache.aspx?d=3704096032869&w=SxACgOAl0Hw7XkTqWVIv0MjpyCTX48C3 https://cc.bingj.com/cache.aspx?d=3704096032869&w=SxACgOAl0H... FT calls crypto "hopium".

38 points by belter 2y ago

sealeck 2y ago

I think this is unsurpring given that the crypto userbase seems to consist mostly of speculators and criminals.

bdcravens 2y ago
There's also a group that's against the Federal Reserve, but that belief system tends to be congruent with the "taxation is theft" group
- OutOfHere 2y ago
  > the "taxation is theft" group Let's be real here. With compounding, total taxation takes away 90% of income. If that's not theft, I don't know what is. There would be an appropriate level of taxation that would be fair, perhaps 10%.
  - worik 2y ago
    > With compounding, total taxation takes away >99% of income That does not compute. Perhaps you could explain that.
    - sandworm101 2y ago
      I think he was aiming for disposable income, rather than all income.
      - worik 2y ago
        I think it is lies.
    - OutOfHere 2y ago
      I haven't yet checked this yet for correctness, but the approach to go about doing such a calculation is at https://chatgpt.com/share/8145329b-b009-46f6-a9cf-7703f4958875 https://chatgpt.com/share/8145329b-b009-46f6-a9cf-7703f49588... It says the answer is a 90% loss (not 99% or higher), which still is quite bad. Again, this is pending me doing the calculations myself. Regarding taxes, a total tax burden of 50% was used to account for all taxes (income, sales, property, etc.) Even this calculation by GPT doesn't take into account the "investment gain" taxes one would have to pay at the end, which would bring the loss percentage above 90.
  - bdcravens 2y ago
    Currently less than 4% of Americans save any money. To assume that any would save enough to compound instead of spend in the absence of taxes is naive.
    - OutOfHere 2y ago
      So you think the hardworking 4% should suffer like the rest of them? Even though they pay more taxes? Taxation is supposed to be fair, but your approach isn't.
      - verall 2y ago
        Do you think that the minority of the population which saves money works harder than the majority that does not save money? * I think that the 4% number is dubious but it's not material to the question.
        bdcravens 2y ago
        I'm just going off of the documented personal savings rate. https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT
      - bdcravens 2y ago
        It seems like you're assuming motivation where it doesn't exist. I'm simply stating that your belief that paid taxes would be compounded to 99% of income is quite a fantastic claim. Besides, there's no proof that the "hardworking" are necessarily more saving than those who aren't. Sometimes the highest earning have the highest rates of debt, ie, they don't save.
    - roenxi 2y ago
      That logic seems a bit circular. I don't endorse the 90% figure because I haven't thought about it, but for the sake of argument if you were faced with a choice where 90% of your income would be redirected away from you vs not saving it'd be expected that nobody would save. So you can't argue that lack of savings under the current system implies no savings under a low-tax system. It is pretty reasonable to suggest that a big contributing factor to the lack of savings is precisely what the tax system does to savers.
  - yuliyp 2y ago
    Yes that's entirely the point. Ideally peoples' share of wealth should go down with time. Return on capital after taxes shouldn't enable people to continue growing their wealth relative to society forever. They should have to actually do work to earn more.
    - OutOfHere 2y ago
      That's an opinion held by slavers. It most assuredly is antithetical to the opinion held by the people.
  - observationist 2y ago
    With compounding, the potential earnings of someone who is taxed but invests over 50 years of work compared to someone else that isn't taxed but does the same investments comes out to about 50% gains of the second over the first. If someone is taxed and doesn't or can't save, or their retirement gets screwed up, or they make enough to get taxed but not enough to invest significantly, or finds themselves in any of a myriad of screwy situations, then they only make 5-7% by diligently saving up the same amount that the first two would have been investing year over year. 95% of their potential income is lost by not investing reasonably. If someone were magically able to not pay taxes, they gain 150% of the good-retirement investment and taxes scenario. Given the constant nickel and diming, the gotchas, the shuffling of money back and forth, and the outsized impact on investment, I completely agree that a flat 10% absolute level of taxation, not a red cent over, would be reasonable. It's also super important to invest, and to keep dropping money into your investments over time that you never touch, just use a diverse and sensible fund, and don't pull it out until you retire. Not only is it theft of the future, it's wasted and misspent in awful ways. Sure am glad all our representatives are getting so wealthy, though. Wonderful people, that lot.
    - roenxi 2y ago
      > With compounding, the potential earnings of someone who is taxed but invests over 50 years of work compared to someone else that isn't taxed but does the same investments comes out to about 50% gains of the second over the first. It might be too complicated to say. Someone who doesn't pay income tax, maybe. Depending on assumptions. But I worked out at some point that >50% of my time spent working was being redirected towards the tax office - my income because it was taxed when I earned it (+ any stealthy payroll taxes), taxed again when it was spent and if it was invested in the middle it got taxed a third time for fake "capital gains" from money creation. When you look at government spending (typically 40-50% of GDP in the West) and consider that most of that is probably malinvestment (by lack-of-alternatives-to-tax they're taking from the most economically productive members of society) you've probably lost more than half your wealth vs a no tax society. There is friction everywhere.
throwing_away 2y ago
Believe it or not, there are people that think real innovation is happening in crypto, and they also make investments and pay taxes. If you search around for crypto tax software, you'll find there's actual demand from people that want to pay taxes on their crypto.
- xienze 2y ago
  > you'll find there's actual demand from people that want to pay taxes on their crypto. I think that’s more of a “need to” thing rather than “want to”, yes even for the people that aren’t using crypto for criminal activity.
  - kreetx 2y ago
    Paying taxes overall is a "need to" thing to most, so nothing new with regarding to crypto.
deleted 2y ago
[deleted]

warkdarrior 2y ago

Isn't that by design? Many/most crypto schemes are designed to democratize access to money and thus they disintermediate traditional players (banks, central banks, etc.). Of course governments and tax authorities are one such traditional player, so they will be disintermediated. The government calls it "tax evasion", while the crypto world calls it a feature.

sealeck 2y ago
> Of course governments and tax authorities are one such traditional player, so they will be disintermediated. The government calls it "tax evasion", while the crypto world calls it a feature. Where do these people think tax revenue goes? Into a big black hole? The money goes to pay for the justice system (which protects property rights, prevents people from killing each other), build and maintain infrastructure of all kinds (roads, bridges, mass transit, sewage systems, water treatment facilities), education, etc. Without the government we'd be much, much worse off.
- corry 2y ago
  Perhaps things aren't so binary on either side. Some people using crypto are criminals, terrorists, and (perhaps less concerning albeit more numerous) tax-evaders. Some aren't. And on the other side, some (much?) government spending is inefficient, highly-politicized, and perhaps contrary to someone's moral compass (e.g. the average American citizen sends $11.34 each year to Israel, or sends Uncle Sam a whopping $140/yr -- out of their own pockets -- to fund the 'War on Drugs' which disproportionately puts black men into prison for small amounts of personal cannabis possession). So yes, gov tax spending builds roads and defends property rights - but that doesn't mean it's all good. A reasonable person can take issue with both the size and targets of much of the spending. Anyways, my point isn't to debate the pros/cons of particular government spending examples, but rather that the average person has not just reason but also a duty to assess how government spending happens, whether or not that aligns with their values, and to vote and organize appropriately to try to change that. If you're already a bit more libertarian, skeptical of federal monetary policy, morally conflicted about how your tax dollars are spent, in tech with a love of technology, then ya you probably are going to like the fact that crypto is outside of the normal system.

scrlk 2y ago

https://archive.ph/Dk9zx https://archive.ph/Dk9zx

PretzelPirate 2y ago

And here I am being a fool paying quarterly estimated taxes on my staking income and capital gains.

throwing_away 2y ago
I also pay my crypto taxes. They need to replace "non-compliance" with "non-enforcement" in this article. In fact, I would love to see some of the "lol taxes" people have some enforcement action taken against them. The only reason wage-tax "compliance" is so high is because there's a system in place to automatically extract as much tax as possible and make you file a refund for the difference. I think you would find equal amounts of "non-compliance" in any cash or barter based business.
- bdcravens 2y ago
  As do I, using Coin Ledger in years I've traded. Almost all transfers from crypto to fiat happen via exchanges and banks, and I can't imagine it would be difficult at all for the government to get their hands on a list of such ACH transactions.
  - throwing_away 2y ago
    I believe that the amount of "untraceable" crypto that exists is extremely low. Go try to buy some crypto in the US without KYC. It's already pretty tightly controlled.
deleted 2y ago
[deleted]

exabrial 2y ago

US Government is mad that people have figured out how to evade taxation as well as their Senators.

surfingdino 2y ago

How much of the tax evasion would disappear if we could pay taxes on crypto in crypto? The fact that the regulators scare banks away from allowing transfers to/from crypto exchanges whilst the IRS and HMRC demand taxes to be paid in USD or GBP makes the space prone to non-compliance and stifles innovation. So, either support legitimate crypto businesses and exchanges or let me pay tax on my meme coin gains in meme coin.

sddsdd 2y ago
Privileging USD for tax payments is a big part of why USD has value. There is zero upside to the US to allow payments in anything else.

junar 2y ago

Related: IRS requires brokers to report certain sales of digital assets beginning in 2025. https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-requiring-broker-reporting-of-sales-and-exchanges-of-digital-assets-that-are-subject-to-tax-under-current-law-additional-guidance-to-provide-penalty-relief-address https://www.irs.gov/newsroom/treasury-irs-issue-final-regula...

wmf 2y ago
This was a huge mistake by the IRS; they should have required this in 2013.
panarky 2y ago
How to they catch people who don't report their crypto capital gains in 2024?

stuffoverflow 2y ago

They estimated the average tax liability of noncompliers to be between $200 and $1087. Also wouldn't the fact that Norway requires to declare wealth in crypto no matter how small the amount likely inflate the number of noncompliers quite a bit? In most countries you are only create a taxable event when exchanging to fiat or other crypto. IMO there should be more reasonable limits to how much you are allowed to sell before being liable for taxes. The amount of time it takes to properly file crypto taxes can be multiple hours especially if you do on-chain trading and need to report every invidual shitcoin exchange and so on. I feel like a significant amount of the tax office's resources would be freed by just allowing something like 5€k a year to be sold tax free.

23B1 2y ago

Good. At this point I'd rather form my own army and build my own highways and teach my own children than pay for entrenched bureaucrats to further entrench themselves along with the powerfully wealthy.

pornel 2y ago
Poe's law.

deleted 2y ago

[deleted]

JohnFen 2y ago

Isn't tax evasion one of the major use cases for crypto?

synicalx 2y ago
I genuinely can't think of use cases other than tax evasion, and 'discrete' purchases.
- beaglesss 2y ago
  Things may have changed, but for awhile it was the cheapest way to buy stuff online in high-risk legal markets like precious metals if you wanted the transaction to clear in under 30 minutes. CC have high fees in high risk markets, wires are expensive for some customers, ACH takes 1+ days. Crypto clears quickly and can't be reversed so some sellers discounted it significantly against credit.
deleted 2y ago
[deleted]
Ferret7446 2y ago
No...? Most crypto is pretty bad for tax evasion because the blockchain provides a permanent public record. There is pseudonymity which when done carefully can provide privacy, but crypto is primarily for digital transactions that get blocked (e.g., credit card companies banning adult content sellers).

indigo0086 2y ago

Good

1vuio0pswjnm7 2y ago

Works where archive.ph is blocked: https://cc.bingj.com/cache.aspx?d=3704096032869&w=SxACgOAl0Hw7XkTqWVIv0MjpyCTX48C3 https://cc.bingj.com/cache.aspx?d=3704096032869&w=SxACgOAl0H... FT calls crypto "hopium".