The Organization for Economic Cooperation and Development (OECD) introduces a proposal that seeks to prevent digital assets from being used to hide wealth. Under the new proposal submitted on Tuesday for stakeholder comment, all cryptocurrency exchanges would have to disclose transactional details of their users to foreign tax authorities and follow the due diligence procedures for identifying customers and reporting their aggregate values annually.
Crypto Assets Could Undermine Common Reporting Standards
According to the OECD proposal, the details to be shared include the users’ names, addresses, social security numbers, and transaction details. It would be the case for transactions between crypto and fiat currency and other digital assets.
Should the proposal pass, crypto exchanges would also have to confirm the tax residences of new users and would have 12 months to figure them out for the existing users. The crypto assets reporting framework (CARF) would also include indirect investments in crypto assets via derivatives and investment entities.
As revealed in the proposal, G20 asked OECD to develop a framework for the automated exchange of information on crypto assets. The framework would provide a means for collecting and sharing tax-related information among tax administrators regarding the people involved in crypto-asset transactions. It includes all assets that can be transferred in a decentralized manner, without intermediaries and assets that may emerge in the future using similar technology.
OECD notes that the adoption of crypto assets has been rapid in recent years, and many people now use them for a range of investments and financial activities.
“However,” the proposal continues, “unlike with conventional financial assets, cryptocurrencies can be transferred and held without the intervention of financial intermediaries and a central administrator having full visibility on either the transactions carried out or crypto assets holdings. Therefore, crypto assets could be exploited to undermine the international tax transparency initiatives like THE common reporting standards (CRS).”
OECD Proposes CRS Review
Along with introducing a crypto assets transaction reporting framework, OECD has also made recommendations that would form part of the first comprehensive review of the CRS. It extends the scope of the CRS to include electronic money products and central bank digital currencies. The proposal also issues provisions that would see an efficient interaction between CARF and CRS, mainly to prevent double reporting.
While the OECD’s proposed rules also apply to crypto ATMs and hot and cold wallets, crypto miners would be exempt. OECD said it plans to exclude the people simply validating transactions on a blockchain and closed-loop assets like vouchers meant for a specific store.
Stakeholder Comments; the Determining Factor
The OECD’s submission comes when the international standard setter Financial Action Task Force attempts to stop the use of anonymous accounts in money laundering schemes and funding terrorism. Tax authorities globally are also trying to clarify the liability of crypto assets. In the meantime, the proposal will have to wait for comments as OEDC continues to seek public opinion. Interested people have until April 29 to send their comments.
Source: https://crypto.news/crypto-platforms-transaction-oecd-tax-proposal/