A recent study from Norway, published by the National Bureau for Economic Research, has highlighted increased levels of tax non-compliance among cryptocurrency holders. The research reveals that a significant portion of the Norwegian crypto community fails to report their digital asset holdings, raising questions about the effectiveness of current tax enforcement strategies.
Findings of the Study
The study, led by economists Tom Meling, Magne Mostad, and Vestre, leverages unique data sources including publicly available tax returns, information from crypto exchanges, and surveys on crypto ownership. The researchers discovered that crypto tax non-compliance is alarmingly prevalent, even among users trading on platforms that share identifiable data with tax authorities.
According to the findings, a staggering 88% of Norwegian crypto holders do not declare their holdings to the tax authorities. This non-compliance extends across various demographics, but is notably concentrated among young, male, and urban individuals. The paper estimates that around 6% of the Norwegian population were engaged in crypto tax non-compliance as of 2022, equating to approximately 250,000 people if considering the adult population.
Implications and Estimates
While the scale of non-disclosure is significant, the actual amount of unpaid taxes may be relatively modest. The study suggests that although a large number of individuals fail to report their crypto assets, the average amount of taxes owed per individual is not excessively high. The researchers provided estimated bounds for the average value of tax evasion, ranging from $200 to $1,087 per person.
When extrapolated, these figures indicate that the total amount of missing taxes could range between $50 million and $272 million for the year 2022. While this represents a small fraction of Norway’s total tax revenue—NKr721 billion in 2022—the potential impact is non-negligible. Even at the lower estimate, the missing taxes could fund significant public projects.
Broader Context
The findings underscore a broader issue that could have far-reaching implications beyond Norway. If similar patterns of non-compliance are found in other countries, the scale of unpaid taxes could be substantial.
The Norwegian study sheds light on a pervasive issue of crypto tax evasion, revealing both the extent of non-compliance and the modest scale of unpaid taxes. As governments and tax authorities grapple with the complexities of digital asset taxation, the findings call for more effective enforcement measures to address this growing challenge.