OECD Urges Examination Of Tax Standards For Cryptocurrency, Blockchain Technology
On Tuesday, the OECD called for international collaboration regarding taxation matters, specifying that its Forum on Tax Administration will study the “tax consequences” of cryptocurrencies and blockchain technology. In the last week, the intergovernmental organization also addressed the emerging sector through its report on the “Tax Challenges Arising from Digitalisation.”
On March 20, 2018, the Organization for Economic Cooperation and Development (OECD) published a 37-page report by Secretary-General Angel Gurría to G20 finance ministers and central bank governors. The document included a section on the tax challenges presented by the digitization of the economy.
“Technologies like blockchain give rise to … new, secure methods of record-keeping while also facilitating cryptocurrencies which pose risks to the gains made on tax transparency in the last decade,” the OECD wrote. “Further work is required to ensure that governments can harness the opportunities these changes bring while ensuring the ongoing effectiveness of the tax system.”
The intergovernmental organization offered expanded commentary on these matters in its “Tax Challenges Arising from Digitalisation – Interim Report 2018,” a 218-page paper published last Friday.
In that report, the OECD stated that tax administrations are investigating how blockchain technology could reduce taxpayer burdens by “increasing the efficiency and security of income and transaction reporting.”
However, the organization wasn’t all cheery, having acknowledged potential pitfalls in decentralized institutions. Blockchain technology, it said, “presents some risks particularly as a result of the absence of a central rule-setting governance mechanism.”
Furthermore, the OECD indicated heightened concern regarding financial transparency, explaining that “if unchecked [cryptocurrencies] may undermine progress over the last decade to tackle offshore tax evasion.” The organization proposed an analysis of the risks of cryptocurrency-based tax evasion, as well as possible legislative solutions like instituting reporting requirements for digital asset exchanges or enabling tax authorities to request and share specific information. Additional examination might be warranted, said the report.
Altogether, the OECD’s statements about blockchain technology and cryptocurrencies are part of its much larger Inclusive Framework on Base Erosion and Profit Shifting (BEPS), an ongoing effort to address tax avoidance. The OECD believes that the project “has set the tone for international tax rules that are fair and ensure that tax is paid where value is created.”
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