Enforcing Taxes on Cryptocurrencies

Hjalte Fejerskov Boas () and Mona Barake ()
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Hjalte Fejerskov Boas: University of Copenhagen
Mona Barake: Skatteforsk, NMBU

No 29, Working Papers from EU Tax Observatory

Abstract: Cryptocurrencies pose substantial challenges to tax enforcement due to their anonymous and decentralized properties, undermining conventional regulatory practices. We study the impact of an ambitious new enforcement initiative aimed at addressing these challenges: domestic third-party reporting of crypto income. We estimate tax compliance and behavioral responses to this new policy by combining unique Danish microdata from domestic crypto platforms, administrative tax records, and cross-border bank transfers. Despite the introduction of domestic third-party reporting, over 90% of crypto investors do not declare crypto income. Moreover, we identify a significant and persistent evasion response to the policy as investors shift trading activity from domestic platforms, subject to third-party reporting, to foreign platforms outside regulatory reach. Our findings underscore the limits of domestic enforcement strategies in addressing tax evasion for decentralized, borderless assets like cryptocurrencies, highlighting the need for international coordination.

Keywords: Cryptocurrencies; Tax compliance; Tax enforcement (search for similar items in EconPapers)
JEL-codes: D31 G5 H24 H26 H31 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2025-03
New Economics Papers: this item is included in nep-inv, nep-iue, nep-pay, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:dbp:wpaper:029

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