Israel Authorities Ups Crackdown On Bitcoin Tax Evaders

Israeli tax agency has provided the clearest of indications, of how serious it is about taxing capital gains in cryptocurrency space.  Reports indicate that the agency has already started sending notices to people suspected of dealing in digital currencies, demanding information regarding their operations.

The move is believed to have been prompted by concerns that people were not making due returns on capital gains from such investments. Bitcoin investors in the country are required by law to pay a mandatory 25% tax on capital gains. Cryptocurrency-focused businesses on the other hand are required to pay an additional 17% VAT on such activities in addition to the 25%.

The high tax regime has reportedly forced people and businesses to come up with new ways of hiding their investments in the sector to avoid paying taxes.  However, tax regulators are slowly catching up with them, backed by reliable sources of information.

While tax authorities are yet to disclose their sources of information, speculation is ripe that banks have been helping authorities track Bitcoin miners and investors. Authorities are also reportedly monitoring people’s peer-to-peer crypto transactions on social networks such as Facebook and Telegram for clues on who to pursue.

Tax Authorities are demanding people who have received the notices to send their transaction history as well as portfolio details and information on bitcoin mining-related activities.  While Israel is the first country to pursue bitcoin tax evaders in the world, it won’t be the last.

Given the amount of money being generated from cryptocurrencies mining as well as trading activities, regulators around the world have started showing signs of initiating tax measures in a bid to make some income from the ballooning industry.

The U.S   is one of the countries where taxation of cryptocurrencies related activities appears to be taking shape.  The country’s Internal Revenue Authority has already raised concerns that only 100 people out of over 250,000 declared capital gains, a clear indication that taxation of the investments could soon become a reality.

In 2016, the agency requested, Coinbase one of the world’s largest cryptocurrency exchange to submit customer data.  While the exchange refused to provide the data, regulations in future could make it hard for such companies to turn down data requests.

Taxation of bitcoin and other cryptocurrencies returns has been hampered partly because such assets are considered illegal in most countries. However, the fact that mining activities are allowed means companies and individuals engaged in such activities have a responsibility to file tax returns.