U.S. Congressmen Brad Sherman and Stephen Lynch have called for tax regulations on the cryptocurrency industry in a joint letter to Treasury and Internal Revenue Service (IRS) leaders.
Lawmakers have highlighted the industry’s important role in tax evasion and its contribution to the nation’s tax gap.
The letter highlighted a September 2020 audit report by the Treasury Department’s Tax Inspector General (TIGTA), which stated that the IRS was unable to identify taxpayers involved in cryptocurrencies due to insufficient reporting. MPs say it’s an issue that needs immediate attention.
Sherman and Lynch emphasized that the Infrastructure Investment and Jobs Act, commonly known as the bipartisan infrastructure bill, requires taxpayers to report cryptocurrency transactions beginning in 2023. However, they expressed concern that the proposed regulations have not yet been enacted.
“For many years, the cryptocurrency industry has been a major source of tax evasion and a significant component of the country’s tax gap,” the congressman said.
They argue that due to the lack of clear tax regulations in the industry, loopholes can be exploited by individuals and entities to evade tax obligations.
Lawmakers further emphasized the potential benefits of implementing proper tax regulations in the cryptocurrency space. They emphasized that establishing a comprehensive framework would not only help improve tax compliance but also ensure a level playing field for businesses operating in the sector.
According to the joint letter, the proposed tax regulations should include measures to accurately track and report cryptocurrency transactions. By doing so, the government will be able to better identify potential tax evasion and improve overall tax enforcement.
Additionally, the congressman noted that other countries have taken steps to regulate the cryptocurrency industry. They cited the European Union’s Anti-Money Laundering Directive and the UK’s Financial Conduct Authority regulations as examples.
They argue the U.S. should follow suit to protect its economy, prevent illegal activity and boost investor confidence.