J5: International Crypto Tax Crimes

The tax authorities of the United States, United Kingdom, Canada, Australia, and the Netherlands have joined forces to combat international tax crimes facilitated by cryptocurrency. They are calling themselves the J5- Joint Chiefs of Global Tax Enforcement.

In an announcement today, the J5 will seek to combat money laundering, tax evasion, and cyber crime. There seems to be overlap in counterterrorism efforts as well.

The full announcement is here: Joint Chiefs of Global Tax Enforcement

“The outcome of this active collaboration will see the J5:

• Enhance existing investigation and intelligence programs
• Identify significant targets for new investigations
• Improve the tactical intelligence threat picture now and into the future
• Lead the wider community in developing its strategic understanding of the methods, weaknesses and risks from offshore tax crime and cybercrime
• Raise international awareness that the J5 is working together to reduce transnational tax crime, cybercrime and money laundering, and create uncertainty for those who seek to commit such offenses.

The J5 was formed in response to the OECD’s call to action for countries to do more to tackle the enablers of tax crime. The J5 works collaboratively with the OECD and other countries and organisations where appropriate.”

Remember that tax authorities have already cracked the Swiss banking system (2008) and are digging through the Panama papers. The sacking of Liechtenstein (RIP 2013) seems much less ambitious by comparison. We seem to be in a new age where tax harbors are not being tolerated.

At the same time, many countries are trying to attract cryptocurrency capital and blockchain innovation. Malta, Switzerland, Gibraltar, and Singapore stand out but they are not alone.

In America, several states are also vying for the most attractive tax regime possible. Delaware, Nevada, and Wyoming are trying to attract traditional and crypto capital with new laws and legal structures. Puerto Rico seems to be of the same mind.

We are seeing technological, financial, regulatory, and social innovations happening rapidly together. Against this backdrop, there is a massive lack of clarity and regulation so it is very hard for an individual or corporation to know how to stay on the correct side of the law. CPA’s in America are literally begging the IRS for clarification that seems very slow in coming. Perhaps this if for the best as the IRS may not want to get in the way of innovation.

Cryptocurrency is truly shaking up the existing finance and regulatory frameworks. Tax evasion and money laundering have been around for a long time and it’s natural that these activities would flow into an asset class that promises fewer barriers and perhaps greater privacy.

At ZenLedger, we help individuals and CPAs aggregate their trading activity across multiple exchanges and then pay their taxes. We believe that cryptocurrency and blockchain technology can be truly beneficial and transformative to every day people. We are in the very early days of crypto. As such, we want to help people comply to existing tax laws as much as possible so that governments do not take disastrously hostile actions towards investors, exchanges, and technologists.