Only 0.53% of investors declared their crypto for taxes in 2022
It is highly unlikely that cryptocurrency traders and investors will report their crypto holdings to the tax authorities, a recent research report from Divly has shown.
The crypto tax automation platform found that the global crypto tax payment rate ranged from 0.03% to 4.09%. The report took a new approach to estimating the tax payment rate – instead of surveying a limited number of respondents, it used a combination of official government figures, search volume data and global crypto ownership statistics.
The highest rate was recorded in Finland, where just over 4% of crypto investors disclosed their holdings. Australia was second with 3.65% of users.
Austria, Germany, the UK and Norway saw between 2.43% and 2.75% of investors list their crypto holdings.
The US, which boasts the world’s largest number of cryptocurrency users, had a crypto tax payment rate of just 1.62%. It ranked just below Canada, where 1.65% of investors paid their crypto tax.
Such a low rate of cryptocurrency tax payments worldwide is likely due to several factors.
First, Divly argues that public awareness of cryptocurrency reporting requirements varies between countries and is often too unclear for most users.
The company also noted that the higher rates recorded in Japan and Germany may be the result of increased government enforcement. Increased enforcement led to greater availability of tax calculators and other tax services, making tax payments more accessible to users.
An ongoing global push to introduce clearer tax rules could lead to a significant increase in crypto tax payments in 2023. The EU proposed changes to the Directive on Administrative Cooperation (DAC) in December 2022, which would require exchanges to share user data with local authorities. If the changes are adopted, local tax authorities in the EU will be able to enforce tax payments on cryptocurrency traders and investors.
The UK is looking to mandate the declaration of crypto holdings in tax return forms from next year.
The US could also see an increase in cryptocurrency taxes this year. President Joe Biden is set to propose changes to crypto taxation in a new 2024 budget plan, which would specifically target money laundering and introduce a new tax on electricity for Bitcoin mining. And while the electricity tax won’t directly affect the amount of taxes paid on cryptocurrencies, increased government oversight of the industry could push more investors to declare their holdings.
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