According to a recent report from Divly, a crypto tax firm, people hardly report their taxes in crypto. The firm’s research on crypto taxes has made some startling revelations about how many investors actually pay taxes.
On Wednesday, Divly released its “Global Cryptocurrency Taxation Report 2022” in which it made some surprising statistics regarding crypto taxes around the world. The research analyzed the percentage of cryptocurrency investors who declared their assets to their local tax authorities last year.
According to Divly, hardly anyone declared their crypto trading or investing activities to tax authorities in 2022. The report stated:
We estimate that globally just 0.53% of cryptocurrency investors declared their cryptocurrency activity to their local tax authorities in 2022.
In terms of payment rates, Finland topped the list with 4.09% of investors in the country that actually paid crypto taxes in 2022. After Finland, Australians acquired the second position with 3.65% of investors paying some duties on their digital asset profits. The Philippines had the lowest payment rate at just 0.03%.
Moreover, the report stated that just 1.62% of Americans paid crypto taxes last year giving it the tenth-highest crypto tax payment rate out of the 24 countries involved. However, even with its low rate, the US came up top as the country with the most crypto taxpayers.
Sources suggest the overreaching control of the Internal Revenue Service (IRS) over Americans’ lives is behind the top spot. Additionally, the report said that U.S. tax compliance rates had doubled since 2018. In terms of continents, Asia despite being the largest continent came out the lowest having just a 0.20% payment rate.
Divly’s research used a combination of “official government figures and search volume data” to estimate the number of investors who declared their activities to tax authorities. It also analyzed the relationship between the number of people who declared their crypto assets in their tax returns and the search volume for cryptocurrency tax-related keywords in a country.
Given the mechanism of the research, there is high reliability of government records. Nonetheless, if these figures are any close to factual reality then the regulators’ concerns regarding the evasion of taxes seem to be justified.
Last month, in its annual budget, the United Kingdom authorities mandated its citizens to declare their crypto holdings starting next tax year. Additionally, crypto holders will have to declare their profits on the capital gains form and will be subject to taxation when investments are sold for a profit. However, as per the current terms holding cryptocurrencies only will not incur a tax.
The United States also stepped up in matters of crypto taxes. Last month, U.S. President Joe Biden proposed a budget that included a provision to close the tax loss harvesting loophole on crypto transactions. In the budget, the U.S. Treasury Department proposed a 30% excise tax on the cost of powering crypto mining facilities. Additionally, it requires people with foreign financial accounts holding at least $50,000 in crypto to report these holdings in their tax reports.
People using cryptocurrencies to evade taxes have been on the table for discussions a lot of times. Last year, the IRS also published a report highlighting a trend wherein cryptocurrencies are being exchanged for fiat currencies, and people fail to report crypto payments. Investors used this method of selling an asset and buying it again to reduce any taxes liable on the profit made.