Known for its comprehensive studies and insights into the world of international economics, the International Monetary Fund (IMF) has shone a spotlight on the crypto realm, identifying its taxing hurdles and calling out the "semi-anonymous" nature of digital assets as a stumbling block for tax systems worldwide.
Cryptocurrencies, walking the tightrope between investments and currencies, have added a twist to the traditional tax narrative. Their pseudonymous nature and blockchain tech are quite the curveballs for tax enforcement, says the IMF in its latest working paper.
Cryptocurrencies don't sit neatly into income, capital gains, or even gambling tax brackets, fueling a dispute on their exact tax classification. Additionally, despite transaction data in spades, a dearth of analytical insights and real-world evidence adds another layer of complexity.
Cryptos' popularity in budding economies ups the ante as well. While technological infrastructure for taxing is somewhat sketchy in these regions, the seizing process of crypto assets also remains a grey area.
The IMF paper doesn't shy away from addressing the elephant in the room - tax evasion within the crypto world, although likely a side-effect, not the main intent of illegal endeavors. Quantifying such evasion remains a challenge, but the IMF estimates that taxing crypto capital gains could rake in anywhere from $10 billion to a whopping $323 billion.
The EU's proposed securities trading tax rates could fetch around $15.8 billion, while applying VAT to all crypto transactions could pull in a staggering $47.4 billion to $118.5 billion.
To leap over the taxing hurdles, the IMF hints at starting with enhanced reporting duties for crypto miners, a move that could pave the way for better tax compliance.