As published on financemagnates.com, Tuesday 11 May, 2021.
Indonesia, which is the largest economy in Southeast Asia, is considering imposing taxes on cryptocurrency trading as demand in the sector is booming with the recent price rally.
Neilmaldrin Noor, a spokesperson for the country’s tax agency, told Reuters that the Indonesian government is willing to strengthen its tax collections after the impact of the ongoing pandemic has drained a lot of its income. However, the proposals to tax crypto are still under discussion.
“It is important to know that… if there is a profit or capital gain generated from a transaction, the profit is an object of income tax,” Noor said. “So the taxpayer who receives capital gain has to pay the tax and report it.”
Taxing profits from crypto is a tough process, and many major countries still have not figured out a proper way to collect crypto income taxes from this industry. Most of the countries are collecting capital gains tax from the incomes generated from crypto trades, similar to other commodities. On the other hand, South Korea has come up with a separate tax structure for digital currencies.
However, the concern lies with the reporting of profits by crypto traders. Due to the nature of cryptocurrencies, it is very easy to trade on an offshore exchange, take payouts in cryptocurrencies, and hide profits from tax agencies.
The Indonesian central bank banned the use of digital currencies as a mode of payment in January 2018 but permitted crypto trading, considering them as commodities. Now, the country is witnessing a significant boom in the industry.
According to Bappebti, Indonesia’s commodity futures trading regulator, the country has 4.45 million crypto investors, which is twice the number of equity investors. And, these are only the investors with the local crypto exchanges.