Järvinen, S. (2022). Tax evasion with untraceable cryptocurrencies in OECD countries as a target of regulation. Unpublished masters thesis, Aalto University. School of Business.
Added by: Rucknium (2022-10-22 17:10)
|Resource type: Thesis/Dissertation
BibTeX citation key: 2022a
View all bibliographic details
|Categories: Not Monero-focused
Keywords: bitcoin, CARF, cryptocurrency, FATF, MiCA, Monero, OECD, privacy coins
Publisher: Aalto University. School of Business
|Attachments master_Järvinen_Sampo_2022.pdf [29/840]
|URLs http://urn.fi/URN: ... aalto-202209185621
Cryptocurrencies known as ’privacy coins’ have benefits for perpetrators of such financial crimes as money laundering and tax evasion. The most well known privacy coin, Monero, obfuscates the transferred value, as well as the identities of both the originator and the beneficiary of a transaction. Currently, such transactions are commonly used in the trade of illicit goods and services. While these transactions often lead to tax evasion as well, Monero can be utilized expressly for the purpose of tax evasion by hiding taxable wealth, capital gains, employment and entrepreneurial income or novel types of income specific to the cryptocurrency ecosystem. DEXs facilitate the exchange of Monero to any cryptocurrency, atomic swaps specifically to Bitcoin and peer-to-peer platforms to fiat currencies and goods.
Cryptocurrencies exist in cyberspace, and as long as one possesses the private keys their utilization in this space is possible regardless of national laws. Due to the characteristics of Monero the authorities are particularly dependent on voluntary declarations of ownership regarding these assets. Thus, this thesis focuses on national laws regarding the declaration of ownership of cryptocurrencies by natural persons and discusses the possible legal consequences of these declarations. Most notably, it was found that only 13 OECD member states have rules mandating the declaration of cryptocurrency ownership in an individual’s yearly tax return. This results in the possibility of strategically transferring and exchanging assets in secret with Monero and falsifying narratives to achieve the lowest possible tax rate. This problem could be alleviated with a mandatory declaration of all cryptocurrencies in the yearly tax return.
The response of various Intergovernmental Organizations such FATF, EU, OECD and IMF has by and large been to enlarge the sphere of AML/KYC requirements, reporting obligations and information exchange to various types of centralized cryptocurrency service providers. This approach limits the possibilities of tax evaders, but seems unlikely to eliminate them as long as DEXs exist and peer-to-peer transactions and atomic swaps are possible. With its most recent proposal, CARF, the OECD attempts to regulate all cryptocurrency trading platforms, including DEXs and peer-to-peer platforms, though it is unclear how these rules could be enforced.
A further dramatic decrease in tax evasion possibilities might result from the move away from cash towards CBDCs. The current CBDC plans have very limited solutions to protect the privacy of citizens whose main CBDC-related concern is the threat to this fundamental right they impose. The author views the adoption of a decentralized privacy coin alongside the adoption of CBDC and the elimination of cash to a viable alternative. This alternative could preserve privacy, maximize tax revenues, reduce criminality and enable the collection of valuable data on the functioning of the shadow economy.
Added by: Rucknium Last edited by: Rucknium