48 countries commit to implement CARF: attitudes of all parties and future crypto tax transparency framework
Written by: TaxDAO
On November 10, 48 countries, including major countries such as the United States, Canada, Germany, and Japan, pledged to combat tax evasion through the Crypto Asset Reporting Framework (CARF), which they plan to implement by 2027. To achieve global implementation by 2027, this requires strong support from all stakeholders.
Short-term impact of CARF commitment
CARF was established in response to the tax challenges brought about by the rapid development of the crypto asset market and the attention of various countries to crypto asset tax cooperation.cryptocurrencyexchangeAutomatic exchange of information between tax authorities provides the basis for joint efforts by contracting states to strengthen tax compliance and curb tax evasion in the rapidly growing crypto market.
CARF addresses this through collaboration and information exchange.cryptocurrencyRelated tax evasion issues are an important step in maintaining financial transparency and combating global tax evasion. Regarding the details of CARF implementation, countries further discussed these issues at the 16th Plenary Session of the Global Forum held in Lisbon, Portugal from November 29 to December 1, 2023: In response to the G20's call for widespread implementation of the Crypto Asset Reporting Framework (CARF) in 2022 and the relevant countries' call for revisions to the AEOI standards, the Global Forum established a new voluntary group - the CARF Group. Taking into account the growing maturity of the EOIR and AEOI standards, the Global Forum also agreed to adjust its peer review and monitoring processes to improve its ability to provide services to Forum members in the future.
It is worth noting that the list of participating countries includes the OECDXiaobai NavigationCARF has expanded to all 38 member countries and traditional offshore financial havens such as the British overseas territories of the Cayman Islands and Gibraltar. However, the absence of major markets such as China, Hong Kong, the United Arab Emirates, Russia, Turkey and India, the non-participation of almost all African countries (except South Africa), and the participation of only two Latin American countries (Chile and Brazil) have weakened the global impact of CARF. There is still a long way to go to establish a global crypto asset tax transparency framework in the future.
Attitudes of relevant parties
The countries that have committed to implement CARF this time do not hold the same attitude. The United Kingdom, a long-established financial power, has a high opinion of CARF. The UK Treasury has previously estimated that crypto tax evasion may be as high as 55%-95%, and believes that participating in CARF provides a good international environment for reasonable regulation of crypto taxation. However, third world countries have mixed attitudes towards CARF. In terms of supporters, the Minister of Finance of Chile said that CARF will help maintain the ever-improving global fiscal transparency. Its audit-related person in charge said that this automatic information exchange speeds up the audit process and improves audit efficiency, and proposed the need to properly handle and protect financial consumer data. South Africa is the only African country to join CARF. The relevant person in charge said that signing the agreement will help South Africa keep up with the rapid development of the crypto asset market.
Some countries have not reached a consensus on the implementation of CARF. For example, Brazil is a signatory country, but the Brazilian Congress has recently launched a number of debates on CARF. Opponents believe that the implementation of CARF will reduce the efficiency of tax litigation and greatly increase related administrative costs.
The implementation of CARF demonstrates the government's intention to obtain information and expand control over the movement of crypto assets. However, the attitudes of various countries towards CARF reflect the different views of various countries. Some comments pointed out that the rules of CARF should be translated into domestic tax legislation. In order to adapt to CARF, the tax compliance procedures of many companies in the future will need to be adjusted, and operating costs may temporarily increase because meeting these standards will bring new requirements, and these costs may be passed on to suppliers and charged to consumers.
The implementation of CARF will alsoexchange与交易者产生相关影响。对于交易所，CARF 要求交易所报告cryptocurrencyOn the other hand, in the bull market, tens of billions of dollars flowed from the traditional financial system into cryptocurrency exchanges and platforms. Traditional financial institutions wanted to stop the trend of capital flight to cryptocurrency platforms. Some banks began to provide their own internal cryptocurrency trading services in 2021. It happens that traditional financial institutions do not need to comply with the CARF standards in the framework.
Requiring exchanges and platforms to track cryptocurrency transactions also further illustrates the impact that CARF could have on the development of centralized cryptocurrency exchanges and platforms, which could benefit decentralized alternatives such as Dex.
CARF will also have an impact on traders, and its impact on exchanges will be transmitted to end traders. That is, the cryptocurrency transactions reported by exchanges will become information for taxation in various countries, thereby having tax implications for end cryptocurrency traders.
The future of crypto tax transparency framework
While CARF represents an important international effort to standardize crypto taxation, it is not the only agreement, and other international agreements on the exchange of tax information involving cryptocurrencies are also advancing.
In October this year, the European Council formally adopted DAC8. DAC8 is a cryptocurrency tax reporting rule that gives tax collectors jurisdiction to monitor and evaluate every cryptocurrency transaction in any EU member state. CoinBase's analysis pointed out that DAC8's crypto legal provisions are a supplement to the anti-money laundering rules under the MiCA framework. DAC8 requires all crypto asset service providers located in the EU to report transactions of EU customers to provide support for anti-money laundering and anti-tax evasion. In addition to restricting crypto assets, DAC8 also applies to financial institutions that issue central bank digital currencies (CBDCs).
As international regulatory frameworks, CARF and DAC8 will not take effect naturally, but require member states to formulate domestic laws to implement them. Based on past experience, DAC8 within the EU will be implemented soon, but the full implementation of CARF will still take some time. The convergence of CARF and DAC8 reflects the efforts made on crypto tax regulation around the world.
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