Cryptocurrencies: A Challenge for Tax Regulation

Abstract

The aim of this paper is to highlight the main problems deriving from cryptocurrencies in the field of taxation.First, the paper will give a glimpse at the key features of cryptocurrencies and Blockchain.Secondly, the paper will deal with the definition of this phenomenon and it will focus on the difficulties faced by different Institutions and entities, at European and International level, to provide a convincing and homogeneous definition of cryptocurrencies.The paper will provide a comparative overview of some different definitions to give an idea of how difficult it is to identify what cryptocurrencies are.Finding out the correct definition is not important as such, but it represents the first step to understand how to tax revenue deriving from cryptocurrencies.In fact, various economically relevant activities are involved in the world of cryptocurrencies, such as mining or exchanging, and such activities need to be taxed.In this scenario, the current legislative framework is not up to date and obsolete and requires robust amendments.How should revenue deriving from cryptocurrencies be taxed?An answer has been given by the Italian Tax Administration, which has issued two responses, following the judgment of the ECJ which, however, do not seem to be conclusive.In fact, the Italian Tax Code does not set forth any provisions regarding cryptocurrencies and the Tax Administration had to interpret the existing provisions.In addition, the paper will explore the approach of a Notice issued by the US Internal Revenue Service (IRS Notice 2014-21, March 25, 2014) and the one adopted by the Virtual Currency Tax Reform Act, which is supposed to give a definitive solution to the problem of taxation in the US.In conclusion, the paper will pose some questions regarding the ability of the tax systems to deal with issues related to cryptocurrencies.