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Global tax loss on crypto holdings is likely tens of billions

Cryptocurrency coins and smart phone valuation check_pexels-alesia-kozik-6771664
Photo by Alesia Kozik

Cryptocurrencies have changed not only individuals' views of assets and wealth development, but also countries' tax systems.

Those are among the issues explored in a just-released International Monetary Fund (IMF) paper.

As for the tax challenges, the IMF paper notes that the capital gains tax revenue at stake worldwide, either because it's not imposed or not collected, may reach well into the tens of billions of dollars. But the more profound risks, say the paper's authors, may ultimately be for value added tax (VAT) and sales taxes.

The paper also cites research monitoring crypto transactions. These efforts tend to show, at least in the United States, that the digital asset market does respond to tax authorities' guidance.

Tangential tax evasion: Unfortunately, sometimes that response is new attempts at tax evasion.

The IMF's better news, at least for tax officials, is that crypto is not an especially effective means for tax evasion due to its high fees and volatility.

And while digital currencies are often used in illegal transactions, such as money laundering via the currencies to make illegal gains appear legal, tax evasion is more likely a by-product rather than a primary motivation.

The continuing interest in crypto and its taxation is why the IMF paper and reports on it are this weekend's Saturday Shout Outs. They are —

Finally, although not tax-focused, you also might enjoy this New York Times piece by Erin Griffith and David Yaffe-Bellany on How Tom Brady's Crypto Ambitions Collided With Reality. That link will let non-subscribers read the article, which does include this one tax tidbit (emphasis mine):

Now FTX is bankrupt, and Mr. Bankman-Fried is facing criminal fraud charges. Mr. Brady, 45, and Ms. [Gisele] Bündchen, 42, have been sued by a group of FTX customers seeking compensation from the celebrities who endorsed the exchange. On top of it all, the terms of the deal would have required the former couple, who divorced last year, to pay taxes on at least some of their now worthless FTX stock, two people familiar with the endorsement deal said.

Enjoy the crypto tax articles. Now I'm off to do some weekend tasks, including checking my investment statements for the just-wrapped second quarter of the year. And no, the hubby and I don't have any crypto/digital holdings.

You also might find these items of interest:

 

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