Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
UK Leading Charge in Global Crypto Tax Crackdown
Crypto Taxes | Nov 13, 2023
Image created by DALL-E3
On November 10, 2023, the United Kingdom has reached a landmark agreement with 48 countries through a joint statement, aimed at combating the use of crypto-assets by criminals to evade and avoid taxes amounting to billions.
The United Kingdom has taken a leading role in an international effort to combat tax evasion in the realm of cryptocurrencies. This initiative, announced on November 10, 2023, marks a significant step in addressing the challenges posed by the digital economy to global tax systems. The UK's commitment to this cause is not a new endeavor. It follows the UK's influential role in the historic G20/OECD global tax deal in 2021, aimed at clamping down on corporate tax avoidance. This deal ensured that taxes are paid correctly and fairly, particularly by large multinational enterprises.
See: Canada: Release Of Draft Tax Legislation For Consultation including GST/HST for Crypto Mining
The rapid growth of the global crypto market has brought new challenges in tax compliance. Estimates suggest that tax non-compliance on crypto-asset holdings could range from 55% to 95%. The CARF aims to address this gap, potentially recouping hundreds of millions of pounds for the UK.
The Crypto-Asset Reporting Framework (CARF)
At the heart of this initiative is the Crypto-Asset Reporting Framework (CARF), spearheaded by the UK and endorsed by the OECD. This framework is a tax transparency standard requiring crypto platforms to share taxpayer information with tax authorities. This level of information exchange is unprecedented in the crypto world and is expected to significantly enhance tax compliance.
See: New U.S. Crypto Accounting Rules Come Into Effect in 2024
The CARF is set to take effect in time for exchanges with other countries to start from 2027. It builds upon the existing Common Reporting Standard, which has already been successful in tackling offshore tax evasion, recovering almost £100 billion in additional tax revenue since 2014.
The initiative has received backing from the 'Global Forum on Transparency and Exchange of Information for Tax Purposes', a forum of 168 countries under the OECD, and has been endorsed by the G7.
Outlook
This initiative not only aims to recoup lost revenue but also sends a strong message against the misuse of digital assets for tax evasion.
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