Crypto taxation is still a major concern for lawmakers and authorities all over the world. And for EU lawmakers, things are no different as they plan to use blockchain to fight tax evasion in the country. Many members of the parliament have called for an “effective taxation” regime which was also approved by a majority of the authorities. The regime targets two important aspects. The first is to counteract tax evasion, and the second is to make life easier for small traders.
EU’s new tax regime could change how crypto taxation works
The first idea is to implement blockchain while taxing cryptocurrencies which is the base of these currencies. Reports say that the authorities want to tax digital assets uniformly, which is not self-explanatory. My guess would be that they plan to tax it like other assets, which include commodities, precious metals, and equities. A document with all these suggestions was drafted by Lídia Pereira and supported by 566 people voting in favor. On the other hand, only 47 voted against the same.
Now, if the European Union makes it easier for occasional and small-time traders to pay their crypto taxes, then it will be effective in preventing tax evasion. At the same time, the regime will also be transparent and fair for more engaged crypto traders. There would be more clarity on what crypto assets are and what kind of events would be taxable. For example, If you buy a coin for $1000 and sell it for $1,100, it will be a taxable event. However, it is possible that the authorities do not tax when one crypto is converted to another.
The document drafted in the parliament also suggests the use of all tools at their disposal for effective tax collection. This would limit corruption and might even help automate the entire process.
It won’t be easy!
The problem with taxing crypto is that the authorities do not have as much visibility as they do with fiat. Plus, the borderless nature of cryptocurrencies makes it difficult to track international transactions. So, it wouldn’t be easy for governments to tax crypto. Tracking users who use decentralized platforms will be even more difficult or even impossible.
What are your thoughts as EU lawmakers plan blockchain use to fight tax evasion? And do you think they will be able to implement it properly? Let us know in the comments below. And, if you found our content informative, do share it with your family and friends.
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