The Organization for Economic Co-operation and Development (OECD) – an intergovernmental organization with 38 countries, established to promote economic progress and world trade – has released its new tax reporting framework, the Crypto-Asset Reporting Framework (CARF), to G20 countries.
The release was based on a request by G20 countries for the intergovernmental organization to develop a framework that provides reporting and exchange of information between countries on crypto assets.
G2O finance ministers and central bank governors will meet on 12-13 October to discuss their views on the new regulatory framework, OECD disclosed the matter.
The CARF framework builds on certain enhancements to the Common Reporting Standard (CRS) that address tax transparency concerns in the digital economy.
The new transparency initiative, developed together with G20 countries, comes amid rapid adoption of the use of cryptocurrencies for a wide range of investment and financial uses.
Unlike traditional financial products, cryptocurrencies can be transferred and held without the intervention of traditional financial intermediaries like banks and regulators like central banks. The crypto market has also given rise to new intermediaries and service providers, like crypto exchanges and wallet providers, many of which currently remain unregulated.
Such developments mean that cryptocurrencies and related transactions are not comprehensively covered by the OECD/G20 Common Reporting Standard (CRS). This, therefore, increases the likelihood of their use for tax evasion while undermining the progress made in tax transparency through the adoption of the CRS.
The CARF framework, therefore, seeks to ensure transparency in crypto transactions by automatically exchanging such information with the local regulators about taxpayers on an annual basis. The CARF aims to achieve this objective by targeting entities offering crypto exchange transaction services on behalf of customers to be obliged to report under the CARF. Most crypto assets such as NFTs, DeFi, cold wallets, wallet addresses, and intermediaries like crypto exchanges and DeFi providers are now comprehensively covered by the reporting standard, unlike in the past.
The CARF framework consists of three building blocks: rules that can be transposed into domestic legislation, guidelines to help local administrators with the implementation of the exchange of information, and technical solutions to support such exchange of information.
The CARF proposal comes at an uncertain time for the crypto market, as recent fluctuations in the values of Bitcoin and other assets have affected several crypto businesses and left them with budget constraints.
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Crypto tax may soon see its own version of the Common Reporting Standard (CRS) as the Organisation for Economic Co-operation and Development (OECD) is reportedly working on a unified approach to handling virtual currency taxation. The news comes as several G20 countries are mandating stricter compliance to national tax laws for traders, exchanges, and other
