Taxing Cryptocurrencies

Abstract

Policymakers are struggling to accommodate cryptocurrencies within tax systems not designed to handle them; this paper reviews the issues that arise. The greatest challenges are for implementation: crypto's quasi-anonymity is an inherent obstacle to third-party reporting. Design problems arise from cryptocurrencies' dual nature as investment assets and means of payment: more straightforward is a compelling case for corrective taxation of carbon-intensive mining. Ownership is highly concentrated at the top, but many crypto investors have only moderate incomes. The capital gains tax revenue at stake worldwide may be in the tens of billions of dollars, but the more profound risks may ultimately be for VAT/sales taxes.

Cryptocurrencies, Tax Ignorance and Tax Noncompliance in Direct Taxation: Spanish Empirical Evidence

“…The ease of access through digital platforms and the attractiveness of potentially high returns due to speculation (Auer and Tercero-Lucas 2022;Alonso 2023) have contributed to this massive growth. However, this boom has not gone unnoticed by tax agencies and public finances, which now face the challenge of adapting their regulatory frameworks to this new financial reality (Baer et al 2023;Caliskan 2022;Tyc and Siuci ński 2020;Ozili 2020).…”

“…Undoubtedly, operations with cryptocurrencies have tax implications, as business transactions with virtual currencies manifest economic capacity-an essential element of tax requirements (Baer 2023;Náñez Alonso 2019). The uses of cryptocurrencies are not always legitimate, and despite the apparent security they offer, fraudulent use exists.…”