Cryptocurrency continues to receive a lot of interest in South Africa, especially considering recent news of land expropriation and government corruption. Citizens are understandably concerned about the future of South Africa’s economy and are looking for other means to store wealth.
Due to the level of perceived investment in cryptocurrencies, the South African Revenue Service (SARS) is worried it may not be getting it’s cut of the pie. While transactions on a blockchain are technically transparent, it’s easy to hide them if nobody is looking.
As a result, SARS is investigating a blockchain technology solution that will help it to ensure citizens are paying tax on their cryptocurrency income. Even though SARS has stated that it does not recognize digital assets like Bitcoin as real currency it still wants citizens to pay tax on them as if they are.
Until now it has been relying on citizens to honestly disclose their cryptocurrency earnings but evidently, the service has decided it doesn’t fully trust South Africans to do this. The new system will come as a double-edged sword though, as it means investors can also declare their losses and as such potentially get a tax break.
SARS Commissioner Mark Kingon mentioned this when he spoke of the new system.
The key thing is identifying people who are trading because it’s easy to say cryptocurrency gains must be deductible, but there are also those who lose,” he said.
Richard de Sousa from South African cryptocurrency exchange AltcoinTrader spoke of his views on the matter.
“If SARS knew the Bitcoin address that you started from, they could track every single transaction that goes out of that address.” he pointed out. “Crypto is not secretive it is extremely transparent.”
A number of countries have already looked into implementing blockchain technology as a solution to tax and other financial services, with varying degrees of success. Considering the troubles SARS has already faced this year in relation to internal management, it will be interesting to see how this pans out.
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