US President Joe Biden’s administration is urging Democrats to include more rules on tax compliance for crypto transactions in the forthcoming USD 3.5tn budget reconciliation package. This comes after the Senate-passed infrastructure bill that extends the definition of “broker” and related reporting requirements to crypto exchanges triggered an industry lobbying offensive before it is to be deliberated by the House of Representatives.
The government aims to expand the legislative package with obligations for crypto businesses to report information on foreign account holders, enabling the US to share this data with its global trading partners, an unnamed administration official told Roll Call.
Earlier this month, the Senate passed the bill with the original crypto tax provision, and it was subsequently submitted to the House which is in recess until September 20.
The latest proposal, which was put forward by the US Department of Treasury’s revenue-raising package released earlier this year, would produce information US officials could share in exchange for data on domestic taxpayers who trade cryptocurrencies in other countries, supporting tax compliance enforcement.
Jerry Brito, Executive Director of DC-based crypto think tank Coin Center, commented that, while many industry representatives do not “object to crypto tax reporting requirements (indeed we’ve asked for reporting guidance for years), we object to last-minute additions to “must-pass” bills outside regular order and with little or no public input.”
If the controversial US infrastructure bill is passed in its current form, it may force an exodus of crypto companies from the US as observers say there is no way to comply with the new requirements.
Commenting on this latest request by the Biden administration, Jesse Powell, co-founder and CEO of major crypto exchange Kraken, said that he wasn’t sure “if this is legal.” Powell wondered why the foreign agencies just do not “ask us for the info directly, as they have been for the last decade. Presumably, US companies are not directly serving non-US clients, except through subsidiaries in foreign countries, which engage locally.”
Meanwhile, the US Congressional Research Service (CRS) released a document to remind lawmakers of trade-offs and risks related to potential forthcoming crypto regulations spearheaded by the Biden administration. The service warns that while new regulations could help the government cut the tax gap, their efficiency is yet to be determined.
“Although enhanced reporting requirements may help to close the tax gap, some underreporting of income generated from crypto transactions will likely still continue as some crypto transactions are intended to elude authorities,” the CRC said.