coingeek.com
Canada intends to crack down on potential tax ‘crypto’ tax cheats by enforcing new global digital asset taxation standards within the next two years.
The Canadian government will apply the Crypto-Asset Reporting Framework (CARF) by 2026, enabling digital asset companies to comply by 2027, when the standard takes effect globally.
CARF is a global tax standard led by the Organization for Economic Co-operation and Development (OECD) that aims to foster the automated exchange of tax information relating to digital assets. It requires virtual asset service providers (VASPs) to collect tax information from their users and report it to domestic tax authorities. These agencies will then share this information with their counterparts to enable tax monitoring.
Forty-eight members of the OECD agreed to implement the CARF last year, with the deadline set for 2027. These include many leading economies such as the United States, Brazil, the United Kingdom, Germany and Mexico. South Africa is the only African country on the list, pledging last November to implement the new standards.
However, some key markets in Asia have shunned the new standards, including China, Turkey and India.
In Canada, the government believes that the rapid growth of the digital asset market poses significant tax evasion risks. In its Budget 2024, it has proposed assigning $37.63 million to the Canada Revenue Agency to implement the new standards. The agency will receive $5.32 million yearly to maintain the standards.
Digital asset taxation has continued to evolve globally as the industry grows. However, a clear trend has emerged—the West has revamped its crackdown while the East is relaxing its measures.
In the U.S., the Internal Revenue Service (IRS) recently shot a warning to ‘crypto’ holders to include digital asset income in their returns or face its wrath. The agency also increased its ‘crypto’ tax department headcount to further clamp down on the sector.
Asian countries, on the other hand, are seeking new ways to reduce taxes or give investors some breathing space. South Korea, for instance, pledged to extend digital asset taxation by two more years to 2027—this would be four years since the new tax laws were first set to take effect.
Last month, Thailand announced a tax exemption for investment tokens to boost the chances of local companies seeking funding. Earlier this year, the country removed VAT on digital asset trading.
In Indonesia, the commodities trading watchdog has called on the tax agency to reduce the tax burden on digital asset traders.