US, UK And Japan To Update Tax Guidelines For Cryptocurrencies
The wave of interest in the blockchain ecosystem across the globe is revealing possible flaws that were hitherto ignored. In fact, it is becoming increasingly clear that crypto traders and investors may soon start enjoying the perks of these tokens when it attains full immersion in the society.
But, in a bid to give it make it legal cryptocurrency, world’s biggest economies have responded swiftly to the manner of taxing users of the currency.
As the completely new digital asset continues to enforce its relevance and impact on the global economy, economic powers have started enacting laws that will regulate the payment of tax on the asset.
Japan recently relaxed the law that stifled crypto businesses and trading. And in a similar fashion, the US and UK are both also seeking a review of the laws that put high taxation users of the asset.
Japanese extant laws recognize that proceeds from trading or mining will be categorized as “miscellaneous income”. Such categorization makes cryptocurrency subject to taxation of up to 55 percent for high profit earner.
Despite Japanese financial regulatory bodies introducing a legal framework that will guide the use of cryptocurrency, taxation of the asset still largely remains relatively complicated.
It is also on record that China’s Court of Arbitration recently ruled that cryptocurrency had become an official and legally backed property asset. However, the new wave of support being enjoyed by the digital asset is promising and a confirmation that digital transactions could soon overtake the erstwhile laws and regulations.
In furtherance, of United States’ willingness to review its tax policies regarding cryptos, the US House Ways and Means committee which works directly with the country’s Internal Revenue Service (IRS), has demanded that clearer definitions be given to the manner users of cryptocurrency are taxed.
Across the globe, the laws regulating the use of and taxing of cryptocurrency remain highly unclear, but powerful economic jurisdictions are now asking that these laws be made clearer and issues relating to them be clearly defined with a view to ascertaining the price to be paid in the form of tax by crypto users.
The US committee has now come out to say that it would ensure that all laws governing the use of cryptocurrency will be simplified and streamlined in such a way that the payment of taxes from crypto proceeds will be seamless.
Although the US government at all levels, recognizes cryptocurrency as a legal and property asset that carries similar legal weight other transactional currencies have, its country’s laws concerning paying tax with the asset still are not as clear as they should be.
One factor that has hitherto left the laws fussy is the inherent complications in the requirements for calculating and converting the currency.
More interestingly, reports in the first quarter of 2018 revealed that a large number of American crypto investors and traders with cryptocurrencies are not willing to disclose the amount of profits they made over the last year.
The reason cannot be farfetched: There are some dodgy calculations complexities which could serve as bottleneck to investors from reporting their gains and losses.
The IRS has received a number of backlash through letters and petitions from different quarters in the country, demanding for clearer stance on the use of cryptocurrency. In fact, the crypto community has demanded for a review of the Cryptocurrency Tax Fairness Act, a bill first proposed last year that aims to make it much easier to use Bitcoin for everyday transactions.
However, the committee in an open letter has come out to order the revenue body to expedite actions in its effort to provide the public with clearer and up-to-date rules and guidance in the enforcement of tax policy against crypto taxpayers.
The lawmakers among other things, asked the IRS “to develop clear rules on how cryptocurrency-related profits would be taxed.”
The letter further conveys on the specifics of the lawmakers’ demand in clear terms which urge the IRS to make clarifications on their regulatory position on the asset.
“We therefore write again today to strongly urge the IRS to issue updated guidance, providing additional clarity for taxpayers seeking to better understand and comply with their tax obligations when using virtual currencies.”
While this is going on in the US, the UK government has also come out to demand clarifications on tax for crypto assets. England’s Cryptoassets Taskforce, a collaborative body charged with the task of probing cryptocurrency, will investigate potential benefits and threats to the country’s economic and financial sector.
The agency, comprising officials from England’s Treasury, Financial Conduct Authority and Bank of England has issued a report which takes a reportedly balanced position on cryptocurrency and blockchain technology, and so demands for an updated guidance for crypto taxpayers.
As more and more governments across the globe are showing serious interest in incorporating and accommodating cryptocurrency into their monetary and financial policies and laws, the revenue accruing from this sector will definitely increase. Naturally, we can expect an increase in taxes on cryptocurrency transactions in the coming years as tax laws could become more stringent on earners from this digital asset.