The South African tax agency, while exploring all available mechanism, is on the verge of developing a method for identifying cryptocurrency traders who evade taxes levied on them, this was revealed by the acting head of the tax authority in the country.
Since implementing the cryptocurrency tax regulation back in April 2018, SARS appears not to be satisfied with the level of tax remittances by cryptocurrency investors in the country. It is obvious that the SARS is currently looking for the best way to identify cryptocurrency tax evaders.
SARS is having an active research and study to fish out cryptocurrency traders that are non-compliant, which is to investigate any scenario of failure to declare gains from investment Mark Kingon, the acting commissioner disclosed this information while at Institute of Internal Auditors, SA Conference in Johannesburg recently. He stressed the need to identify virtual currency traders, saying:
“The key thing is identifying people who are trading because it’s easy to say cryptocurrency gains must be deductible, but there are also those who lose. That’s why it’s important to identify the trader.”
Also, the Chairman of the National Tax and SARS Committee at SAIPA, Ettiene Retief has revealed that the agency is still very much interested in the collection of taxes for both crypto trading profits and losses from traders operating within its jurisdiction.
Officials stated that noncompliant traders would be investigated after being identified. They further noted that identifying defaulters is not going to a difficult mission as it referenced money trail, suggesting that most traders use their credit card to buy into cryptocurrency, in this way it can be traced.
Method of Identification
Kingon revealed that the authority has several ways, though he didn’t state any specifics beyond looking into credit card purchase means, of identifying traders which lacked an efficient clear-cut method of attacking tax evasion. Since the traders also engage in activities outside the economic sphere of South Africa while some are however smart enough to transact in foreign bank accounts.
He also said that SARS would soon develop an ingenious method in order to effectively cryptocurrency traders using foreign bank account due to the information-sharing practices, Kingon was quoted saying:
“In terms of the broader reporting, the common reporting standards, country by country, (ensures) the world is getting smaller, and we are getting far more people transacting in foreign jurisdiction,” He added that: “I think it is a matter of time, but it will enable us to do better.”
The agency has clearly placed the responsibility of declaring cryptocurrency gains and losses on traders and miners which constitute a fragment of their taxable income under standard regulations. This will translate to accountability for Capital Cryptocurrency gains or losses from mining, trading, purchase of cryptocurrencies through exchanges and even their usage in payments. This occurred in April 2018 when the South African Revenue Service (SARS) informed tax payers via a public notice.
Report has it that in recent times, the agency has issued out a warning to the public on tax, which was published on various media platforms, saying:
“The onus is on taxpayers to declare all cryptocurrency-related taxable income in the tax year in which it is received or accrued. Failure to do so could result in interest and penalties.”
It’s apparent that the apex tax regulatory agency is really passionate about this course, but it’s crystal clear that in this situation, passion would not go too far as compelling measures and identifying mechanism needs to be developed in such a way that noncompliant traders are caught. Instead of placing the onus of declaring gains and losses solely on the trader and miners without a form of oversight identification and verification.