Canada’s Tax Authority Targets Crypto Tax Dodgers, Investigating Multimillion-Dollar Cases

cryptonews.com:

The Canada Revenue Agency (CRA) is cracking down on crypto, going after C$54m ($39.5m) in suspected unpaid taxes. It is also launching investigations into hundreds of crypto investors.

The National Post reported Monday that Sahil Behal, a director general at the CRA’s compliance branch, revealed the agency is currently conducting around 400 audits on crypto-related activities. Still, he acknowledged a major need for public education regarding crypto tax obligations.

Meanwhile, veteran tax lawyer, David Rotfleisch, criticized the CRA’s efforts as a “drop in the bucket.” He argued the agency needs to significantly increase education on crypto tax obligations for owners and traders.

He also highlighted the issue by mentioning his own experience dealing with “multiple clients with multimillion dollar (crypto) issues,” emphasizing that he’s just one lawyer and likely sees only a fraction of the total cases.

The CRA has previously faced criticism for how it handled tax cheats in the last couple of years. While the agency secures convictions in smaller cases, critics argue it falls short in tackling larger tax evasion instances and aggressive avoidance schemes.

In June 2021, it clarified cryptocurrency is generally considered a commodity for tax purposes. This means any income earned through crypto transactions is taxed as either business income or a capital gain, depending on specific circumstances. Likewise, any losses incurred are treated as business losses or capital losses.

Not all cryptocurrency buying and selling qualifies as business activity for tax purposes. Taxpayers need to determine whether their crypto activities generate income or capital gains. This significantly impacts how they report it on their tax return.

The CRA