The US tax authority IRS calls in a report for more budget for the fight against tax crimes. A special focus is on crypto currencies.
The US is arming itself in the fight against white-collar crime. That goes out of one Planning report of the Internal Revenue Service (IRS). Accordingly, the national tax authority is calling for a total budget of 13.2 billion US dollars for the fiscal year 2022 – a total of 1.2 billion US dollars more than in 2021. The IRS intends to use the additional financial resources to fight tax fraud and tax evasion. There is a special focus on cryptocurrencies and cyber crime.
To this end, the authority plans, among other things, to increase the staff and expand its own crypto department. For example, they are currently working on a tool that will facilitate analysis on the blockchain. With “STRIKES” you combine the strengths of various tracking programs and thus expand the possibilities of tax investigations. In addition, they want to use the additional funds to award contracts to companies that are supposed to support the IRS in investigating cases of crypto-based tax evasion. A total of 32 million US dollars of the additional money is to be used in this area – a large part would be used for the services of external companies (23 million US dollars).
IRS wants to collect crypto transaction data
The US has long been concerned with collecting taxes from crypto transactions. The US Treasury Department only presented a report at the end of May in which it required a law from 2023 that oblige crypto exchanges to report gross income and purchases. In addition, banks should provide the IRS with additional information about financial accounts for tax purposes. This also includes information relating to crypto transactions.
The IRS report now calls for something similar. Just yesterday, IRS chief Charles Rettig asked Congress to expand the powers of its tax authority. He criticized the fact that so far the majority of crypto transfers over 10,000 US dollars have not reported. This would require clear legal competencies in order to be able to deal with the problem.
I think we need a power from Congress. We are challenged a lot. A clear mandate from Congress about the authority for us to collect this information is critical.
Charles Rettig, chief of the Internal Revenue Service
Due to the massive profits that the crypto sector has posted since the beginning of the year, the US treasury is estimated to have lost around one trillion US dollars. It is essential to close this “tax gap”. In addition, the IRS chief suggested lowering the cash limit from $ 10,000 to $ 600. Republican Senator Mike Crapo criticized this as “too great a disruption in the privacy of citizens”.
Legal position on decentralized finance unclear
It should have been clear to almost every crypto investor that with the growth of the crypto market, the regulation would also be tightened. Due to the corona pandemic, states are now trying to refinance aid through taxes. The crypto space offers a worthwhile destination for this.
Centralized exchanges such as Binance, Coinbase or Kraken in particular are likely to be a real request for regulatory authorities. The situation is different in the area of decentralized finance. Because here an obligation to comply with tax regulations is not possible. Neither reports to the tax office, nor the recording of identity, is to be enforced by the state with the decentralized protocols.
For this reason alone, it cannot be assumed that the crypto platform operators, which are easy to regulate, will be used too hard. The fear of evasive movements in really decentralized crypto realms is likely to be too great.