Crypto assets targetted under US government tax clampdown
By Claire Hunte
12:44, 21 May 2021
The Biden Administration proposed new reporting requirements that include addressing the growth of cryptoassets. The US Treasury outlined a broad set of compliance measures, which it said would "increase fairness in the tax system and foster a tax system where Americans pay the taxes they owe."
Among the proposed measures were new reporting requirements for crypto transfers above $10,000 (£7,000, €8,200) threshold with financial institutions including foreign financial institutions and cryto asset exchanges and custodians also covered under the reporting regime.
The Biden Administration outlined its plan earlier this year in its American Families Plan to overhaul the US tax system. The US Treasury report sets out initiatives to help address "tax gap" —the difference between taxes owed to the government and actually paid. A gap the Treasury estimates totaled nearly $600bn in 2019 and, which it claims, could rise to about $7trn over the next decade if left unaddressed.
Stopping tax avoidance
Although crypto assets are a small subset of the financial market — $2trn in market capitalisation, according to the Treasury— its growth is becoming a cause for concern to government officials in other countries like Canada and China, both of which earlier this week have issued warnings about digital currency. The Treasury said, "cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion."
Adding: "the enhanced opportunities to shield income from tax liability, and even from audits. These opportunities are particularly available for those in the top end of the income distribution who can avoid taxes through sophisticated strategies such as offshoring, creating complex partnership structures, or moving taxable assets into the crypto economy."
The government is expecting cryptocurrency transactions to continue to grow over the next decade particularly in light of a new reporting system and will add resources to the Internal Revenue Service to service the wider net it has cast under the new reporting regime. The Treasury report concluded: "Although cryptocurrency is a small share of current business transactions, such comprehensive reporting is necessary to minimise the incentives and opportunity to shift income out of the new information reporting regime."
