In a bid to fell the growing transnational tax crime in cryptocurrencies, five nations have formed an alliance called the J5. It is constituted by the Joint Chiefs of Global Tax Enforcement and will fight, “tax crime by increasing enforcement collaboration.” It will work together to share intelligence, gather information as well as conduct joint operations.
Five Nation Alliance
The members of this group are Australian, Canadian, Dutch, British and American internal revenue agencies.
According to the American Internal Revenue Service, “we are convinced that offshore structures as well as financial instruments will commit tax crime and also look at money laundering.” Hence, these are anti-social, anti economic and also cause a range of fiscal issues.
Hence, the latest collaboration is to find the ways and means which will allow the agencies to work as a united force and investigate those who engage in transnational tax crime. It will also help in identifying those who launder money in virtual currencies and the beneficiaries of such laundering and illegal use of these alternate coins.
On the third front, the alliance will also explore the probabilities to lower the risks faced by administrations in terms of tax collected. The cryptocurrencies, cybercrime will make data and technology as two parts, hence providing governments the opportunity to handle such situations.
The cryptocurrency industry is seen as the ultimate technology-driven profit earning opportunity by most new age investors. Many from traditional investment systems are willing explorers of virtual currencies, given the historical data of bitcoin in the past year. Price of BTC soared to as much as $20,000 in 2017, though it is slide-off to $6,000 by year end.
However, the volatility has not detracted speculators and this has been the biggest stumbling block for government regulatory bodies. Additionally, bitcoin and other smaller alternate coins have been aggressively marketed, with many high-profiles, celebrity-backed ICO offers catching the interest of non-conventional and conventional investors. Financial investors are also part of the investor group and hence, have been exploited by financial criminals.
At the other end of financial irregularities that can be committed by using cryptocurrency are in declaring profits made through trading in these coins, and posting appropriate returns.
The latter reason has become a growing headache for banking and financial departments around the world, as they combat tax evasion.
Thus far, IRS has categorised bitcoin as conventional asset and treats it as property. It also considers the capital gains from trading in these currencies either as a gain or as capital loos, if prices have dropped.
Poor Tax collection
In view of the cryptocurrencies trading yielding high profits, IRS was surprised to find that many investors in bitcoin failed to pay taxes. The agency found that the percentage paying taxes on these transactions was marginal, resulting in massive loss to the country’s exchequer.
Considering the expansion of cryptocurrency use and its trading, multiple markets in different parts of the world have come into existence. Users from the world over trade on international exchanges and make comfortable profits and minor losses; however, the failure of users to pay the necessary taxes has necessitated governments to find new methods to curtail such non-compliance.
The result is the first of its kind J5, which will allow these five countries to combine and effectively persuade their citizens to pay appropriate taxes.