crypto investors

Research shows 99.5% investors in crypto did not pay tax

  • Finland tops the list of crypto tax payers.
  • Greg Valles warned people not paying tax can get in trouble in future.

According to a recent analysis by the Swedish crypto tax service Divly, just 0.53% of cryptocurrency owners worldwide are expected to pay tax on their holdings in 2022.

Taxation survey in Cryptocurrency

In recent years, cryptocurrencies like Bitcoin and Ethereum have attracted a lot of interest and acceptance. Cryptocurrencies have a number of advantages, like decentralization and improved security, but they also present particular tax challenges for both people and organizations.

To determine the tax payment rate for cryptocurrencies in different nations, Divly used a multi-step methodology. The research involves estimating the number of Bitcoin investors who reported their activity to their local tax authorities by analyzing official government statistics, search traffic data, and readily accessible cryptocurrency ownership data.

Steps used by Divly to calculate Tax Compliance

STEP 1: The procedure started with an analysis of the correlation between the number of searches for cryptocurrency tax-related terms in a given nation and the number of persons who disclosed their cryptocurrency in their tax filings.

STEP 2: In countries where official data on the number of cryptocurrency taxpayers was not available, a leveraged search volume data from the step 1 reference as a proxy for calculating the number of cryptocurrency taxpayers in each nation. This method makes the assumption that there are no appreciable regional differences in the number of searches conducted prior to submitting a tax report.

STEP 3: The predicted number of Bitcoin taxpayers from Step 2 was compared to the overall number of cryptocurrency investors in every country to determine the tax payment rate. The resultant percentage is a representation of how much tax each nation charges on cryptocurrency.

Assumptions made while calculating Tax Payment rate 

Due to the fact that not everyone looks for tax-related information online, search traffic statistics could not fully reflect the number of Bitcoin taxpayers in a given nation.
Different nations have different tax laws and standards, which might affect how much tax is paid.

The Global Cryptocurrency Report from Statista contains information on the number of cryptocurrency users in each nation. For instance, if the numbers given are exaggerated, our tax payment rates can be underestimated.

The research may favour nations with more internet access and more accurate search traffic statistics. 

Status of Countries in Crypto Tax Payment

According to the analysis, Finland will have the greatest percentage of cryptocurrency investors who paid the requisite taxes in 2022 at 4.09%, closely followed by Australia at 3.65%. 

Italy has the lowest payment rate in all of Europe since residents there were only required to register their Bitcoin holdings if they had more than €51,645 worth. Numerous revisions made to Italy’s budget for 2023 should lead to a greater tax payment rate going forward. 

With an estimated 1.62% of cryptocurrency owners paying taxes, the United States came in at number ten on the list. India, Indonesia, and the Philippines had the lowest percentages of tax-paying crypto investors, at only 0.07%, 0.04%, and 0.03%, respectively.

Head of Koinly on the Report

The report’s assertion that a significant fraction of cryptocurrency investors do not pay taxes was questioned by Danny Talwar, worldwide head of tax at the crypto tax software company Koinly. 

Board member of Blockchain Australia and chartered accountant Greg Valles indicated that he would not be able to “say conclusively that the method used is 100% accurate.”

Both tax experts pointed out that government data matching and monitoring initiatives made it harder and harder to evade crypto taxes. 

According to Valles, as government technology becomes more specialized and sophisticated, it will be simpler to identify anybody who is not complying. He also cautioned individuals who do not declare their cryptocurrency income today that they run the danger of having their actions caught up with them in the future.



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