Russian Government Increases Scrutiny of Crypto Market to Trace, Prevent Tax Evasion
The crypto market is under high scrutiny in Russia as the government there is trying to prevent people from evading taxes using these untraceable cryptocurrencies. During an interview, Danniil Egorov, the head of the Russian Federal Taxation Service (FNS) expressed concerns about the negative impact, cryptocurrencies could make in the national treasury if not monitored properly. According to Egorov, these decentralised crypto tokens are capable of causing “significant erosion” to Russia's tax base. The FNS is now exploring ways of responding to crypto tax evasions as well.
“If we talk about cryptocurrencies, then we are now quite closely engaged in this market, realising that this system of calculations can create a fairly significant erosion for the tax base,” a report by Russian media RBC Group quoted the tax official as saying on Monday, November 22.
Revealing plans of installing automated tracking systems to process big data volumes, Egorov said that it is only a matter of time that the “untraceable” link that makes the crypto space unique, would become traceable.
“Technologies are used, anonymisation is used in terms of providing services by various fraudsters, of course. When you get into the digital space, you still leave a trail somewhere. And it's a matter of time before this trail is identified,” the FNS official added.
Presently untraceable in nature, cryptocurrencies are decentralized digital finance system where records are maintained using cryptography, and not any bank or physical intermediary.
As of January 1, 2021, cryptocurrencies were declared “allowed” in Russia — but not to be used as an exchange for goods and services. Russians can mine, trade and hold cryptocurrencies — but using them as a payment option can push people behind the bars, as per a report by Forbes.
While the Russian government has spoken about creating the country's own regulated digital currency, holding undeclared cryptocurrency between $1,300 (roughly Rs. 97,500) and $13,000 (roughly Rs. 9.7 lakhs) is a finable and jail-time offence in the nation.
Regulating Cryptocurrency Around the World
Along with Russia, other nations are also looking at ways to stitch taxation with cryptocurrencies.
In India, for instance, the federal finance ministry has formed a new committee to find out if income made by cryptocurrency trading could be taxed.
Earlier this month, US President Joe Biden also signed a new law which includes tax reporting provisions that apply to cryptocurrencies.
Meanwhile, the cryptocurrency market is booming internationally. Presently, the global crypto market capitalisation is around $2.9 trillion (roughly Rs. 2,15,66,720 crore) as per the data by CoinMarketCap.