UK Spearheads International Effort to Tackle Crypto Tax Evasion
The UK has taken a leadership role in this unique global commitment, aiming to combat offshore crypto tax evasion.
02:12 18 November 2023
In a landmark move on November 10, 2023, the United Kingdom, in collaboration with 48 other countries, issued a historic joint statement, marking a significant stride in the global effort to combat tax evasion involving cryptocurrencies. This initiative represents a pioneering approach to addressing the challenges posed by the misuse of digital assets for evading tax obligations, a problem that has been escalating with the growth of the cryptocurrency market.
The UK has taken a leadership role in this unique global commitment, aiming to combat offshore crypto tax evasion. This effort is part of a broader strategy to bridge gaps in the global tax system and potentially recover hundreds of millions of pounds in lost revenue. This initiative follows the UK's influential role in the G20/OECD global tax deal agreed upon in 2021, which focused on curbing corporate tax avoidance and ensuring that taxes are paid appropriately across jurisdictions.
At the heart of this initiative is the Crypto-Asset Reporting Framework (CARF), an innovative standard developed under the auspices of the OECD and led by the UK. The CARF mandates crypto platforms to start sharing taxpayer information with tax authorities, a practice not currently in place. This new requirement is crucial for enabling tax authorities to exchange information and enforce tax compliance effectively. The implementation of the CARF is expected to begin in 2027, facilitating international exchanges of information.
This significant development builds upon the 2021 two-pillar global tax agreement, which aimed to ensure that businesses pay the correct amount of tax in the locations where they operate. The agreement also targeted large multinational enterprises, seeking to prevent tax avoidance through the implementation of a 15% global minimum tax rate. In light of these changes, it's crucial for businesses to adapt by enhancing their accounting practices to comply with these new tax laws. An online course in business accounting can be invaluable for businesses and professionals aiming to navigate and adhere to these complex international tax regulations.
Victoria Atkins, the Financial Secretary to the Treasury, expressed her pride in the UK's leadership role in tackling global tax evasion. She highlighted the importance of this initiative in securing revenue essential for public services and emphasized the strong message against the misuse of cryptocurrencies for tax evasion.
The CARF is an extension of the existing Common Reporting Standard, a system used by tax authorities for information sharing. Since its inception in 2014, this system has been highly effective in combating offshore tax evasion, recovering almost £100 billion in additional tax revenue from traditional financial assets.
The new framework is vital in addressing the increasing level of tax avoidance facilitated by the rapid growth of the global crypto market. Estimates suggest that tax non-compliance in crypto-asset holdings could range from 55% to 95%.
The UK's role as a global leader in tax transparency has been pivotal in developing, negotiating, and finalizing the provisions for CARF, as well as in rallying international support for its implementation.
For further details, the OECD Crypto-Asset Reporting Framework (CARF) document provides comprehensive information. The Global Forum on Transparency and Exchange of Information for Tax Purposes, a group of 169 countries under the OECD, has been tasked by the G20 to oversee the widespread implementation of the CARF. The CARF has also received endorsement from the G7.
The joint statement aims to reinforce the mandate of the Global Forum and support its work by demonstrating early momentum in this crucial area. This collaborative effort marks a significant step in the global fight against financial crimes and tax evasion, showcasing the power of international cooperation in addressing complex challenges in the financial world.