OECD Opens for Public Comment on Proposed Cryptocurrency Tax Transparency Framework

The Organization for Economic Co-operation and Development (OECD) has introduced additional requirements for reporting crypto transactions and identifying users, aiming to increase transparency for tax authorities around the world.

In a public consultation paper released on Tuesday, the OECD opened for public comment on a proposal that would require encryption service providers to better identify users and report certain transactions. Under current reporting requirements, tax authorities do not have “sufficient visibility” into transactions involving crypto assets, the group said. The OECD said crypto markets posed “significant risks” in terms of tax transparency, claiming that without additional safeguards, any gains would eventually be lost.

The proposal proposes that individuals and businesses already engaged in crypto services, including exchanges, retail trading and token transfers, have 12 months from the effective date of the rules to comply with the reporting requirements. The public was asked to comment on which crypto assets -- including non-fungible tokens -- would be covered in the proposal, as well as tax reporting rules and "due diligence" procedures related to the collection of information on participants in cryptocurrency transactions in hot and cold wallets.

“Unlike traditional financial products, cryptoassets can be transferred and held without the intervention of traditional financial intermediaries, and without any central authority having sufficient visibility into the transactions being made or cryptoasset holdings,” the report’s summary states. .As a result, cryptoassets could be exploited to undermine existing international tax transparency initiatives.”

Today, the OECD published a public consultation paper on a new global tax transparency framework to regulate the reporting and exchange of information on crypto assets.

— Amy Lee Rosen (@amyleerrosen) March 22, 2022

The proposal will be open for public comment until April 29, with a consultation meeting expected at the end of May. The OECD said it aimed to report on revised reporting rules at the G20 summit in Bali in October.

Tax season is here for U.S. residents, with many required to file their returns by April 18. Tax authorities in various countries usually have different reporting requirements for holding or trading crypto assets, and many centralized exchanges in the United States send documents to the IRS reflecting the transaction status of the previous year. Taxpayers typically report the conversion of tokens or cryptocurrencies into fiat currency as capital gains or losses.

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