Taxing cryptocurrencies has been quite a controversial topic across the world, but that hasn’t prevented most countries from introducing a capital gain tax.
However, these countries soon found out that despite the tax regulations, more and more citizens and local companies were finding ways to avoid the watchful eyes of the local tax agencies.
The most recent event took place in Australia, where the ATO (Australian Tax Office) announced that seven large cases were cited in the country in terms of tax avoidance.
This has started discussions about the effectiveness of crypto tax laws across the world, and how they can be changed to better accommodate the local economy as well as the well-being of the investors.
Why are tax laws failing?
The large failure rate of crypto tax laws is due to their inherently flawed design. You see, most governments rely on either of the two types of regulations.
They either delegate the reporting on crypto trading activities on their individual citizens. Or delegate it to the respective crypto exchange operating locally.
It doesn’t need to be said that most of those responsibilities of documenting the crypto trading activities are being ignored, due to extremely large demands on the taxes.
Individuals for example, simply go for third-party payment providers to hide their crypto transaction histories. Even large Forex and CFD brokerages are starting to accept crypto payments to accomodate investors looking for a pipe to liquidate their assets.
However, the most common tactics revolve around online gaming websites and third-party eWallets such as Skrill and Neteller. Through which the investors are able to liquidate their assets and withdraw them bit by bit.
When it comes to the companies being forced to deliver the trading information, most investors simply go with unlicensed companies or any other company located outside of the country’s borders.
In some cases, you can’t really blame the investors for avoiding taxes. In Japan, for example, the crypto capital gain tax is 55%, which simply make the whole industry unprofitable.
How could the laws be changed?
Many are arguing that reducing the taxes due on crypto trades will reduce the subsequent avoidance. But that thought is as flawed as the tax laws themselves. It’s not the size of the taxes that encourage traders to avoid them, but their overall existence and the simplicity of avoiding them.
Therefore, governments need to consider their own monetary gain on these taxation policies. For example, enforcing tax laws require specific offices and task forces. Australia is in the process of forming its own one called J5 as we speak. The maintenance of these entities costs the government quite a lot of money, while not gaining enough from the taxes.
Overall, we have a spiral of lost funds more than gained funds through crypto taxes.
That’s why many experts are suggesting that the taxes be removed completely. And here’s why.
Crypto taxes should be removed
By removing taxes on cryptocurrencies, the government relieves the costs needed for operating the relevant agencies to enforce those laws in the first place.
Once the taxes are removed, the population gets much more access to liquidity, which they use to cash out their funds and use them elsewhere.
Although some re-invest in other ventures, a large majority cashes out their profits and commences to using them in their daily lives.
According to market experts from InsidTtrade, by allowing the population to have full access to their profits, the government is increasing consumer purchasing power (CPP) in the country. With the CPP at a higher level, local companies will start seeing much more revenue in terms of sales, therefore it will incentivize growth.
By retaining the corporate income tax on the grown companies, the governments will be able to get their hands on much larger sums. In essence, that increased income from larger companies is the crypto tax that they were trying to enforce in the past.
By completely removing crypto tax laws from the economy, the government gets much easier access to 100% of the funds, through grown local enterprises and completely revamped local economy.
This is why the crypto community is so against taxes. Simply because there are much better ways of enforcing the law, while not damaging the local consumer.
This story originally appeared on ForexNewsNow.com
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