The fact that taxpayers across the world try to curtail their tax returns is known to all. Businesses and investors seem to have gotten their way around it. As reported by Divly, they stated that 99.5% of crypto investors did not pay taxes in 2022. Governments worldwide are struggling to collect taxes from crypto investors despite the technology’s rapid growth.

What exactly does the Divly report say?

Divly, a Swedish-based firm that focuses on cryptocurrency taxation, released a report on the 5th of April 2023 stating that less than 0.55% of crypto investors came forward while the rest, 99.5% of crypto investors, did not pay taxes and stayed hidden.

According to the report, Finland and Australia have the highest proportion of tax-paying crypto investors, with 4.09% and 3.65% of the taxpayers paying their taxes, respectively. Contrarily, India, Indonesia, and the Philippines are the lowest ones on that list, with less than 0.10% of total crypto investors paying their taxes.

The United States ranked 10th on the list, with an estimated 1.62% of crypto holders paying taxes. Several countries, including India, have expressed their wishes to ban crypto in their countries due to a lack of crypto taxpayers.

Source: Divly

How did they come up with such a conclusion?

The report is analyzed based on the ratio of taxpayers who included earnings from crypto trading to that of the number of times crypto tax-related keywords were searched on the internet. It is needless to say that this methodology is quite questionable as it’s not necessary for taxpayers to search for keywords on the internet.

Another questionable aspect of this methodology to create a report is that the number of cryptos tax-paying related searches did not differ much for many countries. Besides, the internet accessibility rate in every country is different, and this method is not doing justice to countries with a higher internet accessibility rate or countries with more accurate and specific search volume data.

Tax specialists like Chartered Accountant Greg Valles, who is a board member of Blockchain Australia, and Danny Talwar, global tax head at Koinly, have expressed their doubts regarding the accuracy of this method as the 99.5% is not in accounting with countries like the USA, India, Canada, and Australia who have several crypto tax related guidance.

Talwar emphasized that although the risk of non-compliance for crypto is comparatively higher than other asset classes, tax authorities in many countries have different processes in place to obtain data from crypto exchanges.

He added that Koinly had seen awareness of crypto tax “increase considerably” among investors in these jurisdictions, with only “15% of surveyed crypto investors” being unaware of their crypto tax reporting duties.

Final Thoughts

Despite the Divly report, both tax specialists are hopeful that with improved and specialized Government technology, it will become difficult for crypto investors to default tax payments. Several countries have protocols lined up that will obtain data regarding crypto exchange in their country. Thus, with time, people will have to comply and pay their crypto taxes on time.