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Tax Agency: ‘Risk of Crypto Tax Non-compliance Is High in Canada’

Tax Agency: ‘Risk of Crypto Tax Non-compliance Is High in Canada’ 101
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The Canada Revenue Agency (CRA), the country’s leading tax authority, has suggested that cryptocurrency taxation clampdowns are on their way. The agency hinted that individuals and businesses across the country will need to fall in line with compliance regulations – or potentially face prosecution. (The article has been updated on June 26 in order to include comments (in bold) from the Australian Tax Office.)

Answering to Cryptonews.com questions, the CRA said that its probes have unearthed evidence that non-payment of tax on crypto-earnings is common in Canada.

The CRA stated,

“We have learned that there are many types of cryptocurrencies and cryptocurrency businesses across Canada and that the risk of non-compliance is high, which reinforces the importance of compliance work in this market segment. “

As previously reported, the CRA has been operating a specialized cryptocurrency unit since 2017. Earlier this year it confirmed that it was conducting some 60 audits into companies or individuals involved in cryptocurrency trading and/or mining.
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The CRA also confirmed that these audits are “still active,” and that the results were “not yet available.”

However, the CRA says that it is aware that many cases of tax evasion involve cryptocurrencies. The CRA told Cryptonews.com,

“Generally speaking, [crypto-related tax crimes] are becoming more sophisticated, and we are seeing a growing number of cases with some kind of cyber or crypto component.”

Moreover, Canada is a part of a cross-border investigation with the J5 – a joint tax authority task force comprising representatives from the United States, the UK, the Netherlands, Australia and Canada. As reported, J5 is involved in more than 50 investigations involving international enablers of tax evasion, including an undisclosed global financial institution and its intermediaries who facilitate taxpayers to hide their income and assets.

The CRA said that they are not breaking up the cases into different categories (e.g. crypto-related), because many cases have multiple components to them, not just cyber or enablers of money laundering.

"Each of the ongoing investigations involve multiple J5 countries. Targets are a variety of entities, and criminal charges are the goal," they added.

Also, according to the CRA, J5 aims to learn from international best practices to find ways to share and analyze information more efficiently.

"We will significantly improve our knowledge about international cybercrime, the use of cryptocurrencies and the enablers of tax fraud and use this knowledge to take effective action to disrupt these criminal attacks on global financial systems," they added.

J5 is currently working on developing shared strategies, establishing joint operations, piloting international virtual teams and exploring new ways of strengthening their ability to collaborate globally.

"J5 investigations are not just about trying to get tax back, they are about increasing transparency and protect revenue on a go forward basis. By demonstrating that there are significant penalties for participating or facilitating transnational tax related crimes will serve as a deterrent to participate and therefore improve the integrity of the tax system," a spokesperson of the Australian Tax Office told Cryptonews.com in a separate interview.

According to the spokesperson, new regulations and new technologies that look to track and trace cryptocurrencies through the blockchain will continue to increase transparency: "If we see evidence of criminality we will work with domestic enforcement partners as well as international tax partners to find them."

IRS targets 'recreational investors'

Elsewhere, Forbes reports that America’s Internal Revenue Service (IRS) is “turning its attention” to “recreational [cryptocurrency] investors.”

The IRS appears to have appointed special agent Gary Alford as a senior auditor, as it targets non-compliers in what is increasingly looking like a forthcoming crypto tax crackdown. Alford is famous for shutting down the “Silk Road” online drug trafficking ring.

Forbes quotes Alford as saying:

“We are ahead of the curve. We were waiting for the rest of the world to catch up to what we already knew […] We already are aware that there were cases to be made, we just didn’t know if we were at the point where we can bring it for criminal prosecution. We believe we are at that point now. If we had 12 jurors and told them someone made all their money in Bitcoin, we believe that they would understand.”

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