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Bitcoin prices bounced sharply from the level of $3417.6 (Dayâs low on 6th February 2019) to the present level of $5655.0. The spike in prices led the use of cryptocurrency to move funds within the black economy and hide money offshore, which in turn, raised concerns in the global market. The adoption of cryptocurrencies as a mean of financial transaction is picking up, and the governments across the globe are taking actions to safeguard the risk associated with the use of cryptocurrency, such as transfer of wealth.
The black market is rapidly emerging in the cryptocurrency segment, as it is quite challenging to trace the origin and identify the valid owner in the crypto-world, which in turn, prompting the black-market player to transfer the wealth offshores, and many participants are evading tax.
The tax evasion by many investors prompted Australian Taxation Office to launch a data matching program to identify and catch the cryptocurrency investors who fail to pay the right amount of tax in Australia under the capital gain tax regime.
The taxation office in Australia is collecting records from intermediaries such as Crypto-Exchange, Broker, Service Providers, Advisors, etc. or anyone who facilitate the purchase and sale of the digital asset, to match the declarations made in peopleâs tax returns.
As per the Australia Taxation Office estimation, there are in a range of 500,000 to 1 million citizens in Australia, who have invested in cryptocurrencies such as Bitcoin, Ethereum, etc. The Australian Taxation office further estimates that the digital assets are also linked to unexplained wealth and undeclared taxable capital gains.
As per an official of CPA Australia, many people gained significant amount from the cryptocurrency, and may now face substantial bills along with penalties for avoiding tax, further the Australian Taxation Office considers Bitcoin as a property rather than a currency; hence, any gains from the digital asset becomes liable for taxation under capital gains tax regime, when sold for a profit.
Under the capital gain tax regime, if a resident of Australia holds property for more than twelve months before being sold or used, she or he may be eligible for a 50% discount on the capital gain tax. However, noticing the rapid surge and drop (i.e. volatility) of the digital currency market, it is hard to believe that many tax evaders would come to fill for the capital gain discount.
The Australian Taxation office could collect the data from foreign exchanges such as the CME group, where the future of bitcoin currently trades. Once assembled the data could provide the Australian Taxation Office with a direct footprint into the black market, which in turn, could help the office to recover a significant amount of tax lost due to such tax evasion in Australia.
Once implemented and tested the Australian Taxation Office could provide the data to other countries, who are facing the similar tax evasion issues, which in turn, could address tax evasion problems.
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