Based on a report by the National Post, Canada’s Revenue Agency (CRA) is actively searching for uncollected taxes on cryptocurrencies. The agency estimates that there is nearly $40 million in undeclared taxes related to digital currencies. Concurrently, Prime Minister Justin Trudeau is proposing an increase in capital gains taxes from 50% to 66% for any Canadian taxpayer whose gains exceed $183,000 annually.
CRA Eyes $40M in Missed Crypto Taxes
According to the National Post, the CRA is pursuing CAD 54 million ($39.5 million) linked to undisclosed crypto transactions and profits. Sahil Behal, director general of the CRA’s compliance branch, revealed that around 400 audits and investigations connected to crypto assets have commenced. Behal pointed out that these probes originate from the fiscal year 2023-2024 tax period. He also mentioned that the agency still faces considerable challenges in educating the public about their tax responsibilities concerning crypto assets.
The CRA is closely tracking the U.S. Internal Revenue Service (IRS), though slightly behind its American counterpart. The IRS has recently issued a draft of tax Form 1099-DA, designed to detail proceeds from brokered crypto asset transactions, noted for its comprehensive audit requirements. A tax attorney informed the National Post that the CRA has been reticent in providing guidance on how to report it.
“Up until last year, maybe a bit before that, CRA had almost nothing on crypto at all. Crypto was a commodity, that’s it,” the lawyer said. “They didn’t tell you how it’s taxed, that it needs to be taxed, you need to report it … zero guidance from CRA, and that played into it. How are you supposed to know it’s taxable?” he asked.
Trudeau and Party Shoot for Upping Capital Gains Tax to Two-Thirds
The news arrives as Prime Minister Justin Trudeau and his party aim to raise capital gains taxes in Canada. Media coverage primarily highlights that this hike targets corporations and affluent individuals, yet anyone with CAD 250,000 ($183,000) in annual gains will be impacted. Trudeau and his party propose increasing the capital gains tax rate from 50% to 66% in the upcoming budget. A report from Bloomberg Tax suggests, “even the dead wouldn’t be spared from Canada’s capital gains hike.”
Furthermore, Bloomberg highlights a Nanos Research Group survey, which found that 45% of Canadians believe this tax increase will harm the economy and inhibit innovation. While 38% see the capital gains tax as equitable, the rest are uncertain about its effects. Concurrently, as Trudeau advances plans for higher capital gains taxes, the Biden administration in the United States is looking to double the rate. Should President Biden succeed, the capital gains tax could soar to 39.6%.
