President Biden eyes $5 billion revenue from crypto in 2023
US Treasury Department is specifically targeting the crypto industry because it can be used to evade taxes.
The recently submitted Budget proposal for the 2023 fiscal year reveals that President Biden is looking to generate more tax revenue by adopting new crypto tax reporting rules. A US Treasury Department revenue explanation accompanying the proposal reveals the extent of the new regulations.
According to the White House, the government can make up to $11 billion in the next decade by “moderniz[ing] rules” applying to digital asset financial accounting and reporting practices. In the short term, the government project that it can raise almost $5 billion in 2023 alone.
New regulations to guide crypto tax report
Are you wondering how they plan to execute this? The Biden administration believes that applying the mark-to-market rules to crypto could lead to a $6.6 billion tax revenue between the 2023 and 2032 fiscal calendar.
The “mark to market” rule is a mode of appraising assets using the current market conditions rather than the asset’s purchase price.
This allows the government to tax unrealized gains. Thus, taxpayers will have to file tax returns once the value of a cryptocurrency goes up, even if they don’t sell.
Furthermore, the Biden administration will require banks and other financial institutions to share information about the value of non-residents and foreign owners of some companies with the IRS.
This, according to the Treasury, will affect anyone who seeks to evade “tax reporting by creating entities through which they can act.” The department believes this can add $2 billion to the government coffers in the next decade.
The government also proposed a new rule that’ll require any American with more than $50,000 in offshore accounts to report their holdings. This may also affect crypto holders and the Treasury Department and bring $2.2 billion in revenue over the next decade.
Treasury Department targets crypto holders
According to the Treasury Department:
“The global nature of the digital asset market offers opportunities for US taxpayers to conceal assets and taxable income by using offshore digital asset exchanges and wallet providers.”
While there are proposals targeting other assets, there seems to be a keen focus on crypto assets. This is likely due to what the Treasury believes to be the potential of digital assets for tax evasion.
The administration also wants to apply the same rules guiding other lending markets to crypto loans. But there’s no revenue reason given for this proposal. The budget proposal will go into effect on January 1, 2023. But before then, one can expect more deliberations on it at the congress.