Global leaders of the G20 recently meeting at Buenos Aires, Argentina, have arrived at a consensus of introducing international taxation system for the cryptocurrency market. The leaders of the G20 economies have signed an agreement to start working on having a solution for crypto tax.
Moreover, the Japanese news publication Jiji.com reports that the G20 countries will develop the taxation system considering the crypto market as a huge “IT company”. Furthermore, the first review of the report will happen during the next G20 in June 2019, in Osaka, Japan. By 2020, we can expect the final draft for crypto taxation ready for implementation.
Handling the Cross-Border Taxation
As per the existing laws, a government of any country cannot tax a foreign country that doesn’t have a physical presence in its homeland. But the Japnese publication reports that there is enough evidence of companies adopting the crypto route to circumvent taxes. Hence, a major challenge ahead of the G20 nations is developing an international system handling taxation for cross-border payments.
The Leaders’ Declaration stated:
“We will seek solutions for the international taxation issue accompanying the digitization of the economy and will continue to collaborate.”
The leaders noted that they are also working to introduce necessary measures to curb tax avoidance by multinational corporations.
Moreover, the report also mentions handling issues pertaining to money laundering. However, the opinions of the G20 members are not completely in alignment at the moment. While the UK and EU have taken a pro-regulations stand, China and the U.S. still remain cautious about the concept of the international taxation system.
G20 Regulations As Per FATF Standards
According to the Saudi Gazette report, the G20 plans to handle the terror financing and money laundering issues as per the Financial Action Task Force (FATF) standards.
Section 25 of the signed declaration reads:
“We will regulate crypto-assets for anti-money laundering and countering the financing of terrorism in line with FATF standards, and we will consider other responses as needed.”
The G20 declaration reads that it would also consider “other responses” while continuing to monitor the global economy.
IMF Stresses the Need On Global Regulations for Digital Currencies
Christine Lagarde, chief of the International Monetary Fund (IMF) has several times stressed the need for international cooperation for global regulations. While many central banks have earlier dismissed the idea of cryptocurrencies, Lagarde cautioned that it won’t be wise to do it.
Speaking at the World Economic Forum in January 2018, Lagarde said that ‘virtual currencies and their underlying technologies can provide faster and cheaper financial services and can become a powerful tool for deepening financial inclusion in the developing world.’
However, at the same time, she emphasizes that it is necessary to keep bad players out of the global crypto market. Hence a proper regulatory approach on the global scale is appreciable. Lagarde said that one can use the same blockchain technology underpinning cryptocurrencies, to regulate the market.
“The same innovations that power crypto-assets can also help us regulate them. To put it another way, we can fight fire with fire. We can harness the potential of crypto-assets while ensuring that they never become a haven for illegal activity or a source of financial vulnerability.”
Much recently, the IMF chief also backed the idea of having central bank digital currencies (CBDCs) by leveraging the blockchain technology.
“The advantage is clear. Your payment would be immediate, safe, cheap, and potentially semi-anonymous. And central banks would retain a sure footing in payments. They would offer a more level playing field for competition, and a platform for innovation. Meanwhile, your bank or fellow entrepreneurs would have ensured a friendly user experience based on the latest technologies,” said Lagarde.