By Michael Scott
The EU’s new directive aims to create uniform tax reporting guidelines for all crypto operators. Standardized tax reporting will apply to firms regardless of their size and volume transacted.
Although viewed as burdening small-sized operators, the proposed tax rules will apply evenly across the Euro crypto field. An EU representative clarified that the proposal is part of the region’s policy harmonizing the tax-evasion measures.
The new directive aims to increase tax reporting across Europe for crypto operators. It mandates resident and foreign companies that process crypto-related transactions for customers identified as EU residents comply with the tax reporting requirements. The comprehensive nature of the directive is evident in mandating non-European operators of crypto assets to disclose transactions that involve clients considered EU residents.
The uniform tax rules mandate firms to disclose users’ details, such as current residence and place of birth, to the tax authorities. Besides, it requires the crypto-asset operators to disclose the initial amount allocated to acquire the crypto and the sales proceeds received after their disposal.
Benefits of Harmonized Tax Reporting
EU policymakers consider obligating mandatory reporting earnings from crypto-based investments will provide accurate taxes owed to the EU member state. Consequently, the policymakers project that mandatory reporting under uniform tax rules will yield an additional $2.53 billion in revenues for the region.
The EU Commission considers that harmonized reporting standards will trigger regional development of the crypto industry. The proposal acknowledges that transparent reporting on earnings realized by the crypto-asset investor will relatively level the playing field for conventional assets. The commission estimates that implementing standardized tax rules will attract €300 million initial cost with an annual expenditure of €25 million.
EU policymakers supporting the bill reiterate the uniform tax initiative will minimally affect small and medium-sized crypto operators. They dismiss the argument that the directive is bound to impose an additional burden on small firms since the required information is in their possession.
The impact assessment by the EU council acknowledged that the uniform crypto tax initiative would lower the compliance costs for firms operating in multiple jurisdictions. The Council confesses that SMEs will incur lower compliance costs under the standardized EU rules than when complying with a patchwork of numerous reporting requirements.
Concerns Raised by Crypto Advocates
Crypto enthusiasts are opposed to the uniform tax rules considering the disclosure required involves a complex compliance process. Besides, the critics are concerned that the Council underestimated the annual cost incurred by the crypto service providers.
Remarkably, they have questioned the capacity of tax authorities in all member states to handle and process the enormous amount of information produced and sent by the crypto firm.
They are conveying their perspectives during the opened feedback window, from which responses garnered will feature in the legislative debate.
Beyond the uniform tax requirements, the EU announced working on the crypto regulation package identified as Markets in Crypto Assets. The new regulation package is considered critical to avoid reliance on the patchwork of legislative provisions that differ across the EU region.