A study of cryptocurrency taxation regimes from around the world by the Organization for Economic Co-operation and Development, or OECD, found that global crypto taxation laws are highly inconsistent.
Source: OECD Report.
The way crypto assets are defined vary greatly by jurisdiction. Cryptocurrency is most commonly defined as a “financial instrument or asset”, followed by a “commodity or virtual commodity.” In the U.S., the asset class remains mostly undefined for tax purposes.
Source: OECD Report.
The same inconsistency is observed when it comes to determining the first taxable event for mined cryptocurrency assets. The most common approach here is to tax coins at creation, though some nations choose to tax the first disposal of mined coins instead. Several jurisdictions employ variable rules depending on the entity involved.
The report also noted that the inherent volatility of crypto assets presented additional challenges:
“A high level of volatility makes valuation complex, although it is key for the calculation of the overall capital and of capital gains, and therefore, in establishing the tax consequences under income taxes”.
The report suggests that policymakers should take the environmental impact of various cryptocurrencies into consideration:
The tax treatment of the electricity costs associated with mining and of the proof-of-stake consensus mechanism, which requires considerably lower electricity use can therefore affect environmental consequences, particularly if the costs of pollution are not reflected in prices.
The document urged policymakers around the world to bring greater clarity to the taxation of crypto assets. Even in cases where the existing framework is applied, it suggested crypto-specific guidelines “to promote clarity and certainty for taxpayers.” It also proposed simplified taxation rules and exemptions for small trades or transactions.
This post first appeared here: https://cointelegraph.com/news/oecd-calls-out-countries-for-their-inconsistent-rules-on-crypto-taxation