Dáil Éireann Debate, Thursday - 23 November 2023
86. Deputy Emer Higgins asked the Minister for Finance if he can provide an update on Ireland’s membership of the crypto-asset reporting framework and any proposed legislative change to tax reporting relevant to the exchange of information between members; and if he will make a statement on the matter. [51396/23]
View answer93. Deputy Alan Dillon asked the Minister for Finance to provide an update on his Department’s actions to crack down on cryptocurrency tax evasion; and if he will make a statement on the matter. [51525/23]
View answerCryptocurrency tax evasion is a matter of growing concern, not only in Ireland but worldwide. It is an evolving landscape. It is essential to ensure tax compliance strikes a balance with innovation and investor protection. I would like an update from the Minister on the actions taken by the Department to combat this issue.
I propose to take Questions Nos. 86 and 93 together.
I thank Deputy Dillon for raising this issue. It has been the long-standing position of Government that the international tax system needs to keep pace with changes in how business is being conducted globally. In terms of the action occurring on tax issues in the crypto-asset sector, officials in the Department of Finance and Revenue have been involved in developing the crypto-asset reporting framework, CARF, in recent years.
CARF is an international standard for the automatic exchange of crypto information between tax authorities, developed at the OECD. The reporting framework will require reporting crypto-asset service providers to provide details of all relevant crypto-asset transactions by their users. The exchange of information between tax authorities is a powerful tool to ensure tax compliance across borders. The exchange of information assists tax authorities in accessing necessary information on taxpayers to increase tax compliance. Recently, I joined 47 of my international partners in signing up to a joint statement which commits to commencing crypto-asset reporting framework exchanges by 2027. The statement is available on the Department's website.
Revenue is a member of the expert subgroup to the OECD's working party No. 10, which is developing the technical framework to allow for CARF filing and is part of the newly formed global forum CARF group, tasked with developing proposals for the delivery of CARF's widespread implementation. CARF is being delivered in the EU through an amendment to the directive on administrative co-operation, DAC.
DAC facilitates co-operation between tax authorities of EU member states. It provides a framework for various types of exchange of information, as well as other administrative co-operative measures. Under DAC 8, reportable transactions carried out by all users resident in an EU member state, including Ireland, by a reporting crypto asset service provider resident in Ireland will be reportable to Revenue. A proposal to amend the directive on DAC 8, to deliver CARF in the EU was approved by ECOFIN in May 2023 and DAC 8 was adopted by member states in the Council on 17 October 2023. The transposition of DAC 8 will deliver the CARF rules into Irish legislation in advance of the 2025 transposition deadline.
Revenue published an update to its tax and duty manual in April 2022 that covered the taxation of crypto-assets for corporate and individual crypto-asset holders. The guidance reaffirmed that current tax legislation principles apply to cryptocurrencies, and that no special tax rules should apply to crypto-assets and that general tax principles apply for their acquisition, ownership and disposal. The normal self-assessment taxation rules apply to taxpayers in relation to income and gains derived from crypto-assets. As such, Revenue takes the same approach in identifying and confronting non-compliance in respect of the payment of tax on crypto-asset transactions as it does all other non-compliance. Revenue delivers a risk-focused, effective and proportionate response to non-compliance that reflects taxpayer behaviour. Revenue’s compliance intervention framework provides for a consistent graduated response to taxpayer behaviour, ranging from extensive opportunities to voluntarily correct mistakes, up to the pursuit of criminal sanctions for cases of fraud or evasion. Other than a relatively small number of randomly selected cases to validate the integrity of the risk approach, taxpayers are selected for compliance intervention based on the presence of various risk indicators. Cases have historically been selected using various risk-driven methodologies, including REAP, Revenue’s electronic risk and analysis system, and real-time risk analytics for VAT and PAYE. However, Revenue’s approach to compliance management is evolving to reflect the increasing incidence of real-time tax administration.
I thank the Minister for his comprehensive response. It is crucial for Members of this House to understand the cryptocurrency landscape, which while evolving rapidly presents complex tax challenges. I am interested to hear from the Minister the amount raised in tax by the State from crypto-assets. If he does not have that figure he might give it to me in writing.
Cryptocurrency is becoming increasingly mainstream. I would be interested to hear what steps are being taken to educate and inform the public of the tax obligations when dealing with digital assets. That is really important. Given the international nature of cryptocurrency transactions, it is good to hear the Government has a plan and is collaborating with international partners, and with EU colleagues to ensure tax evasion in the crypto space is effectively addressed. I welcome the Minister's comments and want to ensure we strike the balance between protecting investors and fostering innovation in the crypto space.
It is a complex area, and one that is rapidly evolving. My Department is paying close attention to developments in this area. It is important to say that Ireland is already recognised as a global leader in the exchange of information. Exchanging information on crypto-assets is important and reinforces our commitment to best international practice and tax transparency. Given the nature of the issue at hand, we can only address it collectively with countries working together through established frameworks. It is also in the relevant international forums that we can have a co-ordinated and cohesive approach to dealing with the issues that arise from crypto-assets. That is why we have been directly involved in developing the crypto-asset reporting framework in recent years. I assure the Deputy we will continue to work on that. I do not have to hand the data he has sought. I will check with the Department what information we have and can make available.
With the various types of crypto-assets, such as stablecoins and utility tokens, and with the privacy focus around cryptocurrency, it is important to have information in the public domain about what types of revenue the State is generating in this space. As we have said, people are looking for innovative areas in which to invest, such as digital assets. We certainly need a monitoring and tracking tool to ensure crypto transactions are reported, given their decentralised and pseudonymous nature within the sector. That would be important. As the Minister says, we are now moving into a space where a lot of people are investing in these types of assets. It will be a major sector in the years to come.
I assure the Deputy that the Revenue Commissioners are active in this space. It is important we take every opportunity to remind people of what the taxation obligations are, in particular in an emerging area such as digital assets. That is why, in April last year, the Revenue Commissioners updated their guidance on crypto-assets. They did not change their general guidance with regard to the taxation of crypto-assets. However, additional clarifications were provided to aid the general understanding of the mechanics of crypto-asset taxation. This included additional guidance on how to determine if a crypto transaction is trading in nature, how chargeable gains should be calculated for capital gains tax, CGT, purposes including the providing of illustrative examples and details of CGT payment dates for non-incorporated persons. It also included guidance that confirmed gifts and inheritances of crypto-assets may be subject to capital acquisitions tax, and that payments of crypto-assets to employees are benefits-in-kind that should be subject to payroll taxation in the ordinary way. However, the receipt of crypto-assets as payment by an employee may give rise to additional filing obligations for income tax or capital gains tax, for example, depending on the applicable facts and circumstances for that employee when he or she disposes of the asset at a future date. Guidance was also introduced setting out the record retention requirements relating to crypto-asset transactions. I am satisfied the guidance is there, but we perhaps need to find ways to amplify that and raise awareness for people engaged in buying and selling digital assets at this time.
