Governments Are Taking Wrong Approach to Cryptocurrency Taxation

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Cryptocurrency, Taxes– Earlier today EWN reported on a
development by several different countries, including
Japan, to impose more severe regulations and protocols
for catching so-called “cryptocurrency tax evaders.”
However, the approach of vilifying the group of investors,
particularly in the broader context of this year’s market
and the state of crypto regulatory oversight–or lack
thereof–is sending the wrong message and will
ultimately backfire for the bureaucracies that enact them.

For one, crypto taxation is unnecessarily complex. While
traditional media outlets have had a proverbial field day
publishing the abysmal rates of cryptocurrency
customers actually paying taxes on their investment, a
figure which could be less than one percent of the
participating population, they fail to take into account the
severe complexity of the current tax code. While taxing
earnings from individual trades is somewhat part and
parcel for the markets of stocks, the trading atmosphere
for cryptocurrency, where thousands of trades can be
executed by an average user in a single year given the
minuscule transaction fees, does not lend itself well to
the same penal code.

On Dec. 4, the government of Japan announced a new
initiative to enforce crypto taxation, including the
development of a system that would specifically track
down evading individuals who refuse to pay. While it’s
little surprise that a government would attempt to collect
on the significant taxes being generated from
cryptocurrency appreciation, particularly during 2017’s
bull run that saw the currency jump from $1000 to near
$20,000, it still sends the message that the majority of
crypto traders are criminals as opposed to respected
investors.

We have yet to see the impact of a more simplistic tax
code in relation to cryptocurrency, and whether it would
make an impact on the current unfavorably low rate of
actual taxes paid on crypto earnings. On one hand, the
community of cryptocurrency has set itself up for such
scrutiny, given the decentralized and largely libertarian
ethos surrounding the industry. With talk about the
“dangers” of fiat and the government who control them,
it’s understandable that tax services few their
competition as outlaws attempting to evade and operate
outside of the established system.

However, pushing crypto investors to jump through
endless hoops of the ridiculous tax code, without even
the attempt to find a happy intermediary, sends a
message that governments are not willing to
compromise. The end result has been an investment
base that has little interest in complying, more out of
paralysis than spite. While few are happy to pay taxes,
particularly those gained through savvy investing, the
significant deck stacked against most crypto investors is
enough to have them bow out all together.

Rather than painting the crypto investment community as
cheats, tax evaders and criminals, governments should
seek to find a more simplistic means for collecting taxes
on crypto gains. The current model, which asks investors
to calculate appreciation on individual trades from the
thousands of currencies across the market, is not a
conducive means for compliance, and fails to take into
account the nature of the cryptocurrency industry and the
way most traders operate.

In addition, simplifying the tax code for crypto shows a
willingness on behalf of governments to take the industry
seriously as a digital asset and newly emerging
landscape, as opposed to the current discourse which
treats crypto investors as second class citizens.

Source : https://ethereumworldnews.com