U.S. Tax Authorities Take On Wealthy Crypto Traders
Date: 2023-07-14 Author: Karina Ziganova Categories: BLOCKCHAIN, BUSINESS
The U.S. Attorney's Office and the Internal Revenue Service have launched an investigation into wealthy crypto traders who are suspected of illegally using tax breaks offered by Puerto Rico. Bloomberg writes about it.
Puerto Rico has had an attractive tax regime for hedge funds and crypto traders since 2012. This policy has allowed some investors to legally avoid paying federal income tax and not pay taxes on dividends, interest, and capital gains at all. To meet the requirements of Puerto Rico's tax policy, investors must reside on the island for at least 183 days a year and maintain close local ties.
In total, about 5000 US citizens, as well as 3600 enterprises, took advantage of such benefits. Now the US authorities want to check everyone who has ever lived on the island and could hide the sources of their income.
According to Bloomberg sources, at least two US citizens may soon be charged. Potential charges include conspiracy and wire fraud. The investigations concern taxpayers, as well as promoters, lawyers and accountants who promoted the tax program.
Locals are against benefits for Americans
The program began with the Puerto Rico Export Services Act and the Individual Investor Act. In 2020, they were merged into Act 60, which required benefit businesses to generate $3 million in revenue and hire at least one Puerto Rican. Individuals must buy a house on the island and donate at least $10,000 a year to charity.
Although U.S. investors have benefited from tax policy, locals have expressed a negative reaction to the program. Moreover, locals criticize the influx of wealthy Americans for price gouging on real estate and much lower taxes than native Puerto Ricans. Last year, they participated in protests because of the policies of the authorities.
The U.S. is accelerating with crypto taxes
Last month, members of the U.S. Congress, Brad Sherman and Stephen Lynch, appealed to the U.S. Treasury and the IRS to speed up the process of developing crypto taxes. They expressed concern about the tax gap that exists in the crypto industry and demanded the introduction of new rules.
Lawmakers argue that the use of cryptocurrencies helps citizens evade taxes, which ultimately leads to huge losses for the US budget. In addition, the development of the cryptocurrency industry requires more effective control and oversight mechanisms by the government.
