The EU Parliament votes in favor of blockchain application against tax evasion and changes in the taxation of crypto-assets

On 4 October 2022, the European Parliament shared the result of the vote in a press release: 566 out of 705 members voted in favor of a resolution to make better use of blockchain to fight tax evasion. In addition, an efficient and fair taxation of crypto-assets was up for debate.

Both the use of blockchain applications and the regulation of crypto-assets are very popular in the European Parliament. Authored by Lídia Pereira, the resolution considers “simplified tax treatment” for crypto users involved in casual or small transactions. In addition, national tax authorities should use blockchain technology “to facilitate efficient tax collection”. 13 MEPs debated this on Monday and finally adopted the non-binding resolution.

On taxation of crypto-assets

The Commission urges the authorities to tax crypto-assets “fairly, transparently and efficiently”. Furthermore, the round proposes simple tax treatment for occasional and small entrepreneurs as well as transparent transactions.

To this end, the decision first asks the Commission to assess the different Member States’ methods of taxing crypto-assets. In addition, the resolution aims to identify the various national policies to combat tax evasion in the crypto-asset space.

To achieve this, according to the debate, two definitions are crucial: First, a clear and generally accepted definition of cryptoassets. Second, a consistent definition of what constitutes a taxable event. Regarding the latter, the resolution proposes to convert crypto-assets into fiat currency. Whether this option makes sense should be examined in the Commission. In this context, it is also important to propose alternatives and include them in the decision-making process.

As a final point, the European Parliament’s press release lists the group’s demands to adapt the directives on cooperation between administrative authorities in the tax field. Because the cross-border nature of crypto-asset trading requires a transnational exchange of information. The purpose is to identify the exact location of taxable events.

Blockchain for better tax collection

One thing is becoming clear in the EU Parliament’s debate: Blockchain technology is finding its way into the state system. Attention to the technological possibilities and benefits is in any case increasing. In this regard, the people’s representatives call for blockchain solutions to be integrated into tax programs:

“Blockchain’s unique capabilities could provide a new way to automate tax collection, curb corruption, and better identify ownership of tangible and intangible assets,” the discussion said.

Another argument in favor of blockchain: using this technology can prevent tax evasion. Not only since the minimal tax payments of huge “global players” became known, the public’s dissatisfaction with the subject of “tax evasion” has repeatedly become the focus of political and social discussions.

Because of these potentials, according to delegates, the EU should “identify the best practices for the use of technology to improve the analytical capacity of tax authorities.” To pave the way for the benefits and opportunities of technological advances to state bodies, the resolution urges: “Member States should continue their efforts to reform their tax administrations, in particular by modernizing them.”

Finally, an important note: In the world of politics, resolutions are resolutions, but not laws! The proposals discussed are merely a request and are intended to put pressure on the parties addressed. So it remains to be seen how EU policy will handle the requirements.

Blockchain, crypto and the EU – an outlook

At least since the “Markets in Crypto Assets” Regulation, better known as the MiCA Regulation (MiCAR), the EU has been considered a pioneer in crypto legislation. The draft law was first submitted to the European Commission in 2020. Recently, the MiCA was also adopted by the European Council (ER).

The law aims to create a uniform regulatory framework for the crypto sector for EU member states. It includes the first unified crypto regulation in the EU. Now it still needs approval from the EU Parliament and the assembled plenary to adopt the law in full. This process is expected to last until mid-2024. Many see a positive development in Europe’s legislation, including Coinbase CEO Brian Armstrong.

Regarding blockchain, experts are discussing the use of blockchain technology in connection with EU supply chain legislation, which is expected to enter into force in 2023. According to this, CO² values, for example, could be displayed transparently and tamper-proof on a blockchain. The Federal Ministry for Economic Affairs and Climate Protection (BMWK) is explicitly concerned with sustainability in connection with blockchain technology. We see: Blockchain and crypto are attracting increasing attention in high political circles. We can look forward to the events that await us in the future.

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