#CorporateTaxCompliance

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Crypto Tax Evasion: UK Leads Worldwide

  Leading the Charge Against Offshore Tax Evasion

In an unprecedented move, the United Kingdom, on November 10, 2023, has forged a historic joint statement with 48 nations to confront criminals exploiting crypto-assets for tax evasion, potentially recouping billions in lost revenue. This groundbreaking initiative marks the UK's pioneering role in a global commitment to combat offshore crypto tax evasion.   Minister Atkins Commends International Cooperation Victoria Atkins, the Financial Secretary to the Treasury, commended the international collaboration that aims to close gaps in the global tax system. Speaking about the monumental agreement, she expressed optimism about recouping hundreds of millions of pounds in lost revenue through this joint effort.  

Building on the G20/OECD Global Tax Deal

This landmark agreement follows the UK's leadership in the historic G20/OECD global tax deal established in 2021. The previous deal focused on curbing corporate tax avoidance, ensuring that taxes are paid in the appropriate jurisdictions.   Introducing the Crypto-Asset Reporting Framework (CARF) At the forefront of this initiative is the Crypto-Asset Reporting Framework (CARF), the OECD's latest flagship tax transparency standard. Spearheaded by the UK, CARF mandates that crypto platforms share taxpayer information with tax authorities, a practice not currently in place. This ensures that tax authorities can exchange vital information to enforce tax compliance. The CARF is slated to take effect by 2027, signaling a significant step towards combating offshore tax evasion.  

Financial Secretary Atkins Affirms UK Leadership

Financial Secretary Victoria Atkins expressed pride in the UK's leadership in addressing global tax evasion. She emphasized securing essential revenue for public services and sent a strong message that criminals cannot exploit crypto to evade their fair share of taxes.   CARF and the Global Crypto Market The CARF builds upon the OECD's Common Reporting Standard (CRS), a successful system established in 2014 for tax authorities to share information on traditional financial assets. With nearly £100 billion in additional tax revenue recovered, the CRS has been instrumental in combating offshore tax evasion. Experts consider the new framework essential for countering escalating tax avoidance in the rapidly growing global crypto market, where estimates indicate non-compliance on crypto-asset holdings ranging from 55% to 95%.   The Global Challenge of Corporate Crypto Tax Evasion Cryptocurrency tax evasion is a mounting issue worldwide, with corporations increasingly using crypto assets to conceal income and avoid taxes. The exact extent remains unknown, but estimates suggest it could be in the tens of billions of dollars annually. Some of the most common methods of corporate cryptocurrency tax evasion include using offshore exchanges and wallets to hide crypto assets from tax authorities, employing crypto assets for transactions with entities not subject to tax reporting requirements, and engaging in wash trading to create artificial capital losses.   Challenges in Developing Countries Cryptocurrency tax evasion poses particular challenges in developing countries, where weak tax enforcement and limited awareness amplify associated risks. Governments globally are taking steps to address corporate cryptocurrency tax evasion, but tracking and enforcing compliance in the crypto space remains challenging.   Recent Corporate Crypto Tax Evasion Cases Here are some specific examples of recent corporate cryptocurrency tax evasion cases that underline the growing scale and sophistication of the issue: - In 2023, Indian tax authorities seized nearly $0.5 billion in evaded GST from local cryptocurrency exchanges. - In 2022, the UK's HMRC seized crypto assets and NFTs intended for use in a VAT fraud scheme. - In 2021, the US Department of Justice charged a group with operating a cryptocurrency exchange used for money laundering and tax evasion. These cases highlight the urgency of the global effort led by the UK to combat corporate cryptocurrency tax evasion and secure essential revenue for public services. The Crypto-Asset Reporting Framework's implementation is poised to take a pivotal step in curbing this escalating issue by fostering international collaboration and transparency.   Sources: THX News & HM Treasury. Read the full article