Why Did All Attempts At Encryption Tax Fail?

When we spoke, governments around the world were considering the regulatory framework for encryption fees. Of course, those who have implemented it have also provided encryption tax legislation, but these strategies seem to have no effect.

The government has the responsibility to supervise any financial services so as not to damage the investors themselves. In this regard, almost everyone has achieved some success. Because fewer and fewer people become victims of crypto weapons.

But as more and more dealers find ways to avoid this situation, none of them seems to be able to meet the requirements of the encryption tax regulations. This is because regulations are incompatible with decentralized assets such as cryptocurrencies.

Why do people evade taxes?

In most cases, investors will find that cryptocurrencies are not officially recognized as monetary or financial assets, so it is meaningless to pay capital gains.

To some extent, they are right. Items that are not classified as sources of income or tradable assets generally do not have tax allocations. The only thing we can think of is the car tax in most European countries.

Another reason is that people do not know how to include Bitcoin profits in the capital return report. Because of the lack of guidance, many people simply ignore it, but do not maintain their profits.

The last reason is greed. Of course, if someone is offered the option of tax evasion, he will accept it. The government’s strong restrictions did not stop it. Most of the legislation focuses on the responsibility of citizens rather than the responsibility of companies, which provides a scapegoat for cryptocurrency traders to not report their earnings at all.

What does the crypto tax law look like?

The government implements two types of encryption tax laws. Civil responsibility and corporate responsibility module.

The citizen responsibility module depends on the kindness of citizens themselves, and hopes to actively report the capital gains of cryptocurrency. Of course, most people don’t do that because they can’t exchange cash.

In fact, not exchanging cryptocurrency helps to retain “cryptocurrency”; no taxation “. Many countries have non tradable asset classifications, so they have adopted non trade asset classifications worldwide. As long as traders put cryptocurrencies in their wallets, earnings will not be taxed.

The corporate responsibility module is for companies providing encryption services. These can be all crypto mining companies or cryptocurrency exchanges. The government just relies on these companies to report their customers’ trading activities and calculate adequate taxes.

However, the framework has serious problems. It only involves local companies, not foreign companies.

How People Escape Cryptographic Taxes

For the citizenship module, as mentioned earlier, many people will not report profits or cash in. Recently, however, there has been a new trend for cryptocurrency investors to transfer funds to traditional financial companies.

For example, some foreign exchange and CFD brokerage companies have begun to accept crypto deposits. This is often used as a liquidity provider platform. After investors deposit funds in intermediary companies, they withdraw money from electronic wallets and cash it in corresponding ATMs.

In fact, it can be seen from the comments of some brokers that almost 10% of broker customers choose deposits as cryptocurrencies. This may be due to the diversification of encryption radar, but it may also be due to tax evasion mechanism.

When it comes to the responsibility module of the company, traders will be much easier. They don’t use local companies at all. This is why we see so many American citizens choose exchanges like OKEX or Binance to avoid Coinbase.

Their funds are not in the local exchange, which means their trading habits cannot be legally reported and recorded.

Once they are ready to exchange cash, they will go through the same process as the citizenship module.

What can you do about it?

There is no clear vision for a strategy to reduce the number of investors evading the cryptocurrency tax. Although the only example is in South Korea, the restrictions there are so strict that all the essence of cryptocurrency is sacrificed for taxes.

In Korea, investors need to use ID cards to pay taxes. Anonymous trading is illegal, which means that any attempt to perform such payment will expose traders.

Another way for the government to deal with cryptocurrency tax restrictions is simply to remove them.

Yes, that’s right. The best way to deal with cryptocurrency taxes is to remove them completely from the regulatory framework. The reasons are as follows.

There’s no tax

The current encryption tax legislation is fundamentally invalid. If they can get at least 40% or 50% of the expected tax, the government is lucky. In other words, the resources used to apply these restrictions account for only half of the expected results of the project.

Improving this process requires more resources, such as capital and manpower. At this point, 100% revenue cannot make up for all this. The best way for the government to deal with this problem is to let traders enjoy their capital gains.

When citizens of a country can spend more money, they are more likely to spend it locally. They are more likely to invest and strengthen the local economy. Local companies can use more money in their customer base, thus increasing sales.

This is the so-called consumer purchasing power. The more power consumers have, the more likely they are to invest in a place or support start-ups or established companies.

As sales increased, the company’s growth meant that it began to pay more taxes to the government.

Therefore, the tax on the final crypto capital gains will still be returned to the government, in which case they will get 100% of the gains and all the transactions.

Therefore, by simply abolishing this legislation, we can obtain a freer market, provide more purchasing power for local consumers, and reduce large enterprises with better growth rates, more reliable tax flows and costs. Because there is no new handling charge.

The only problem this may cause is that foreign exchange and stock traders may complain about their taxes. This is why the government is unwilling to implement this policy. But the problem is that eliminating taxes on these tradable assets can also stimulate the economy.

In general, the best solution to crypto tax evasion is to completely abolish the tax policy.