International Tax Panorama

A Study by the Swedish tech company Divly has revealed that the overwhelming majority of crypto owners worldwide are not paying taxes on their holdings. As per the paper, less than 1% of crypto investors paid tax in 2022.

Specifically, the report revealed that just 0.53% of investors globally declared their crypto activity to local tax authorities last year. 

According to the study, Finland had the highest tax payment rate, with 4.09% of crypto investors paying taxes, while the Philippines had the lowest rate at 0.03%.

Australia earned second place with 3.65% of investors declaring and paying crypto taxes, while in the US, which hosts the world’s largest number of cryptocurrency users, the crypto tax payment rate was at just 1.62%, slightly below Canada, where 1.65% of investors paid their crypto tax. 

In Austria, 2.75% of crypto investors declared and paid cryptocurrency taxes, with similar numbers of 2.61% being present in the UK. 

In Asia, Japan had the highest tax payment rate at 2.18%.

Despite the government introducing a hefty 30% tax as well as 1% TDS on cryptocurrency last year, almost a negligible proportion of investors in India declared and paid tax on crypto last year.

According to a research report by Swedish tech company Divly, just 0.07% of investors in India declared and paid tax on cryptocurrency in 2022.

Among the European countries looked at, Finland had the highest payment rate and Italy the lowest at 0.26%. Divly said the possible explanation for Italy’s low payment rate was that citizens were only required to report Bitcoin holdings of more than $56,267 in 2022.

Notably, no African country was tracked for crypto tax despite the region being one of the fastest-growing crypto markets in the world, according to IMF, with transactions peaking at $20 billion per month in mid-2021.

India’s Crypto tax report: 

Despite the government introducing a hefty 30% tax as well as 1% TDS on cryptocurrency last year, almost a negligible proportion of investors in India declared and paid tax on crypto last year.

According to a research report by Swedish tech company Divly, just 0.07% of investors in India declared and paid tax on cryptocurrency in 2022.

What methodology did Divly used? 

What makes this new research report stand out is that it took a rather unconventional approach to estimate the tax payment rate. Specifically, it relied on a mix of official government figures, global crypto ownership statistics, and search volume data as opposed to surveying a limited number of respondents. 

The methodology behind the Divly report was named questionable by publications such as cointelegraph, as the report itself noted that search volume data may not accurately reflect the actual number of crypto taxpayers, as not everyone who pays tax searches for crypto tax-related information online.

What is causing this low rate of crypto tax payments?

According to Divly’s report, the public awareness of cryptocurrency reporting requirements is different in each country, and some users are simply unaware of their tax obligations. The higher rates of compliance observed in countries such as Japan and Germany resulted from increased government enforcement, which resulted in higher availability of tax calculators and other tax services. 

As for the US, the country could also experience a boost in crypto tax payments in 2023 according to Indiatimes.com. The Divly study highlighted US President Joe Biden’s plans to introduce changes to crypto taxation in a new budget blueprint for 2024.  

These alterations could potentially target wash trading and introduce a new tax on electricity for Bitcoin mining. As a result, as the government keeps a closer eye on the crypto industry, more investors could feel obliged to declare their crypto holdings in the future.