According to the head of Russia’s tax agency, digital currencies may reduce taxable profits

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According to the head of Russia’s tax agency, digital currencies pose a unique threat to the country’s taxation activities. In an interview, he stated that his agency closely monitors digital currency activities for tax evaders, but digital currency users are easy to track because they leave an immutable digital footprint on the blockchain.

Russia has prohibited digital currencies as a payment method but permitted citizens to hold them as assets. The country’s legal system considers digital currencies to be taxable property.

Daniil Egorov, the head of Russia’s Federal Tax Service, revealed that digital currencies are one of the areas that his agency is concerned about in an interview with Russia’s media conglomerate RBC Group.

The Tax Service, which took over the Ministry of Taxes and Levies in 2004, is looking to find a solution that permanently eliminates digital currency tax evasion.

Russia would not be the first country to reduce suspected tax evasion via digital currencies or increase taxes on the sector. The Biden administration in the United States passed the Infrastructure Bill, which seeks to raise more taxes from the sector.

The US Treasury stated in a report,

“Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion.”

Egorov insisted that the Russian tax agency has put structures to keep up with the digital currency industry.

While he mentioned Bitcoin as a tax reporting loophole, he also admitted that tracking tax evaders on the blockchain is simple. Because of its immutability, blockchain makes it easier for law enforcement to track money and link transactions to individuals using blockchain forensics tools.

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