Have you paid tax on your Cryptos yet?

(I am based in Australia - I write this article with most of my knowledge being of the Australian situation, while attempting to keep content broad enough to be useful or thought provoking to a global audience. This article only just scrapes the surface of this topic, and is just a bit of an intro or awareness raiser of the topic)

I want to congratulate a large number of Governments around the world. They certainly anticipated the potential of Crypto-currencies (cryptos) prior to the recent/current boom.

One outcome of this has been the commencement of regulation of exchanges which provide the ability for fiat currencies (USD, AUD, GBP etc.) to bex exchanged for cryptos (BTC, ETH etc.)

You may have noticed when signing up to some of the larger exchanges such as BTCMarkets and Independent Reserve in Australia, BTC China and Huobi in China, CEX in the UK etc, enough personal data is captured during the sign up process to enable the government to track you down in regard to any profits you may have made via cryptos. This will enable enforcement of taxation laws relating to cryptos in those countries.

Of course there are several reasons why this information is collected by the exchanges, including increasing the security of your funds held by them. Government tracking and taxation is just one of those reasons.

It certainly is an excellent illustration of governments’ ability to ensure they get a share of any improvement to your financial situation that may arise by virtually any means. In this case - your ability to trade cryptos in such a manner that results in a profit.

Taxation implications may not have been a consideration for all those involved in buying and selling cryptos, but it will have a negative impact on all, perhaps more so on those people who are not aware that they are legally obliged to declare profits in their income tax statements – and pay applicable taxes.

Under the current environment, sending cryptos around between wallets and people can be done relatively anonymously. It must be kept in mind however that if someone is determined enough, the blockchain can be used to track down specifics relating to transactions, including which computer and ultimately who was involved.

Despite the ability to move cryptos around relatively anonymously, there is still the catch of having to change them back to fiat currencies (AUD, USD, EUR, GBP, CNY etc.) at some stage to realise profits in the form a widely accepted currency that can be used to purchase most things. It is at that point that governments will seek to impose taxation requirements on people.

It would certainly not be a stretch of the imagination to envisage attempts being made to avoid paying tax on crypto profits. For this reason, I will document a few possibilities that people may undertake with this end in mind:

Gumtree

Using this online sales marketplace which most commonly involves face-to-face cash transactions, people may advertise their cryptos for sale here. People can meet and exchange cryptos for cash.

Meet-ups

Groups of people may organise to meet at an event where they can trade cryptos for cash amongst themselves.

Crypto for services/goods

Through a suitable medium, people may wish to spend pay for services rendered such as handyman or plumber in exchange for cryptos.

Over the internet

This is more traceable as the payment is provided to you electronically rather than in cold hard cash but unlikely to be captured in small amounts. People may organise to send cryptos to each other in exchange for online bank transactions.

Crypto ATM

If there is one near you, use the ATM to withdraw from your anonymous wallet.

With the aim of reducing traceability, all of these methods would be facilitated through the creation of wallets using anonymous methods. Another article will be written on the methods that people may use to create wallets anonymously will be investigated – including the best wallets available for this purpose at the moment.

I’m sure there has been plenty of thought put into this topic already. This is a topic that can be written on to a great level of depth given the intricacies of taxation law and the uncharted territories that cryptos have created. It would be great to see other peoples thoughts on the matter.

This article was not written to encourage tax evasion in any way. Rather it is an observation of possible activities that may be undertaken by people faced with the possibility of taxation obligations.