The International Monetary Fund (IMF), has advised Nigeria, and other countries, to consider taxing crypto users.
IMF made this recommendation in a report titled; “Crypto Poses Significant Tax Problems—and They Could Get Worse”.
In the report, the Fund said countries can generate value-added taxes (VAT) and income tax from crypto assets, which could have amounted to $100 billion worldwide if a 20 per cent tax was placed on capital gain amid soaring prices in 2021.
BizWatch Nigeria understands that cryptocurrencies enjoyed a boom in 2021, with Bitcoin leading the park having surged to nearly $70,000 in 2021, from $200 a decade ago, before plunging to around $29,000 recently.
IMF addresses concerns with the tax categorisation on crypto assets
IMF admitted that a key issue with its recommendation is classifying crypto assets -either as a property or a currency.
The United Nations agency, however, suggested that capital gains should be taxed when a crypto asset is sold for profit, however, when it is used to make purchases, VAT should be collected.
“A key issue is how to classify crypto assets—should they be regarded as property or currency? When crypto is sold for profit, capital gains should be taxed as they would be on other assets. And purchases made with crypto should be subject to the same sales or value-added taxes, or VAT, that would be applied for cash transactions.
“So, one important task is to ensure application of these principles, which requires clarity on how to characterize crypto for tax purposes: in essence, as currencies for VAT and sales taxes and as assets for income tax purposes. While this is not easy due to the evolving nature of crypto asset transactions, it is perfectly possible. The deepest challenges are then in enforcement,” IMF wrote.
