Canada's Crypto Questionnaire for Tax Purposes — Is It Overkill?

Recently, we reported that the Canada Revenue Agency (CRA) is looking into its citizens’ cryptocurrency investments, sending them a questionnaire and asking them detailed questions about their purchases.

The questions cover a variety of subjects, including the time frame for when an investor had begun investing, the use of mixing services to anonymize transactions, and the particular exchanges that they used to trade cryptocurrencies.

The crypto community’s response to the announcement has largely been united, with several making tongue-in-cheek remarks about their investments in crypto assets and showing concern about the amount of information being requested by the CRA.

On reddit, quite a few users expressed concern about the CRA’s deep and thorough questionnaire.

Reddit user towjamb said how authorities would do better to focus on regulatory clarity to “remove friction from the financial system”:

This shows that CRA is well versed in the functions of cryptocurrencies and that they are actively auditing prolific traders, miners, and those buying and selling. And the blockchain offers them unprecedented transparency to monitor one’s financial history. This is the exact opposite of financial freedom.

 

Governments just aren’t going away, nor will they relinquish the revenue and power that comes with controlling a country’s currency. I believe time would be better spent lobbying for regulatory clarity and e-commerce exemptions with the goal of removing friction from the financial system.



It isn’t that investors are against taxation.

As user Downvotes-All-Memes put it:

the tax system will just have to adjust…there’s no reason those taxes can’t be also made high frequency and automated, it’s just going to be a paradigm shift like a lot of other things with crypto.

Taxation has always been something of a challenge for authorities, given the very nature of cryptocurrencies. Nevertheless, countries are mulling over how to approach the process.

Meanwhile, some U.S. states, like Ohio, have legalized Bitcoin for the payment of state taxes, while New Hampshire is considering doing so as well.  

Recently, Starbucks made an equity deal with Bakkt and in exchange would allow purchases in crypto (though the Bitcoin would instantly be converted into fiat), though some reports suggest that taxes might be something of an obstacle for the development.

Ernst and Young has also released a cryptocurrency tax tool for institutional and high-value investors.




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