Crypto market has gained mainstream attention from investors globally. As the industry got mainstream, regulators and taxation authorities have also begun to eye the market. Recently, the Russian Federal Taxation Service (FTS) has also been observed monitoring the digital assets ecosystem closely to prevent tax evasion. According to Daniil Egorov, the head of the tax authority, digital currencies can potentially cause significant erosion to the nation’s tax base. Hence, as these transactions are still traceable, individuals should report.
Russian FTS seeks to curb tax evasion
In a Monday interview with the local publication RBC, Egorov cited that the cryptocurrency transactions should be reported to FTS. Indeed, the tax authority is prepared to deploy automated tracking systems to process big data volumes. The authority noted that as any individual gets into the digital ecosystem, they still leave a trail somewhere. And within a matter of time such trails could be identified.
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Hence, the Russian tax authority is about to introduce ways of responding to crypto tax evasion practices. Indeed, the FTS looks to curb such activity rather than just to identify them. According to Egorov, the tax authority would like to find solutions that halt a problem as a phenomenon rather than just identifying actions by a specific player.
Russians will have to report their transactions
The news of the FTS’ preparations revealed after the Bank of Russia (BoR) proposed to roll-out criminal liability for “illegal circulation of digital financial assets”. Notably, the liability will be introduced as part of the national financial market goals for 2022, and the period of 2023-24. It is also noted that as part of the proposal, the BoR is looking to establish the crypto taxation policy.
In February, the Russian State Duma approved a bill on cryptocurrency taxation. The bill was approved in the first reading, that requires residents to report their digital currency transactions of a total amount exceeding $7.8k.
Cryptocurrency firms can generate $4bn worth taxes
Sergei Khitrov, the founder of the Russian crypto event, Blockchain Life has noted that the digital assets businesses in the region could potentially generate $4 billion worth of taxes each year. He further cited that the local digital currency community has so far demonstrated a complete failure to understand how to pay tax on virtual assets.