According to a report published by the Swedish crypto tax firm Divly, only an estimated 0.53% of all crypto investors have paid their taxes. The report, published on April 5th, analyzed the relationship between search volume for crypto tax-related keywords in various countries and the number of people who declared cryptocurrency in their tax returns. Finland had the highest proportion of crypto investors who paid the required tax (4.09%), while the Philippines had the lowest (0.035%).
“In the US, an estimated 1.62% of cryptocurrency investors declared their crypto to tax authorities in 2022. Therefore, the US has the 10th highest crypto tax payment rate out of the 24 countries analyzed. In Asia, Japan had the highest tax payment rate at 2.18%. Ongoing efforts by Japan’s government and the Japanese Cryptoasset Business Association (JCBA) to facilitate the crypto tax calculation and declaration process seem to be paying off. The Philippines, on the other hand, where paying taxes on cryptocurrency is mandatory but where regulations are ill-defined, sits at the bottom of the list of countries analyzed,” said the report.
The method used to arrive at this conclusion is questionable, as it relies on search results and not all crypto investors may have searched for those keywords online. The report cautioned that there could be potential bias towards countries with greater internet accessibility and more accurate search volume data. It also suggested that tax regulations and requirements differ from country to country and can’t be held as a uniform measure for everyone.
“Our analysis revealed that, on average, the probability of an individual who owns cryptocurrency having also paid taxes on it in 2022 is 0.53%. However, it is important to note that this low average is affected by certain countries, specifically those with a large number of cryptocurrency traders who did not declare their assets to the tax authorities in 2022,” said the report.
Overall, the analysis provides only a small insight into the current state of cryptocurrency. Countries like India, among others, have only recently released cryptocurrency tax regulations. These more defined regulations should encourage cryptocurrency traders to declare their crypto to the tax authorities. Therefore, although many have, up to now, gotten away with not declaring their cryptocurrencies, we expect many traders would eventually have to declare their taxes and perhaps even face fines for missing previous declarations.
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