The UK government is considering giving the HM Revenue & Customs Department powers to seize digital assets from custodial wallets of companies evading tax.
The government considers this proposal in light of new regulations normalizing digital asset payments.
UK Tax Authority Expects $12 Million From Individual Crypto Taxes
Parliament is considering a revamp of the Direct Recovery of Debts (DRD) legislation, which currently allows the HMRC to seize the bank account funds of tax evaders. The revision, proposed in a new consultation paper, would allow the HMRC to access custodial wallets and PayPal accounts.
While crypto exchanges cannot stop user inflows, they can prevent users from cashing out funds to fiat or transferring them to another
Stakeholders felt that the HMRC’s responsible use of the current DRD suggests it will not overreach digital wallet privileges.
The government will consult “wallet operators” to develop the proposal and understand implementation challenges.
The HMRC collected 787 billion GBP ($994 billion) in the last tax season.
The tax authority said that cryptocurrencies would be added to individual returns, adding about $12 million in capital gains collection.
Law enforcement like the London Metropolitan Police can already crypto linked to criminal activity. Last year, the agency cracked open a drug trafficking ring by tracing crypto fund flows between the exporter and importer. In 2021, they seized almost $400 million in illicit crypto.
IRS Uses AI to Track Crypto Tax Evasion
The US Internal Revenue Service (IRS) recently deployed to help international law enforcement crack down on tax and other financial crimes involving cryptocurrencies. They will act as international proxies advising case agents on the feasibility of obtaining certain evidence. The agents will also advise on local legal and cultural considerations.
The IRS analyzes crypto tax disclosures and investigates white-collar crime through tools developed by AnChain.ai. The government will give the agency $80 billion for enforcement actions, including a clampdown on crypto tax evasion. New US tax laws will track transactions of the clients of crypto brokers from 2024.
