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Cryptocurrencies: An empirical view from a Tax Perspective

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Abstract

This paper sheds light on the scarce empirical evidence on cryptocurrency users and use types. Based on the only available empirical estimate (shared by Chainalysis), this paper simulates the revenue potential from taxing Bitcoin capital gains in the EU. Total estimated Bitcoin capital gains in the EU amount to 12.7 billion EUR in 2020, including 3.6 billion EUR of realized gains. Applying national tax rules on capital gains from shares to those from Bitcoin yields a simulated tax revenue of about 850 million EUR in 2020. This paper is the first to empirically assess the tax revenue potential of capital gains from Bitcoin in the EU. While most of the empirical cryptocurrency literature is based on time-series data, this paper relies on dis-aggregated country-level data. The findings show that revenue from taxing cryptocurrencies is non-negligible and will be if the market of cryptocurrencies continues to grow.

Suggested Citation

  • Andreas Thiemann, 2021. "Cryptocurrencies: An empirical view from a Tax Perspective," JRC Working Papers on Taxation & Structural Reforms 2021-12, Joint Research Centre.
    • Handle: RePEc:ipt:taxref:202112
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    File URL: https://publications.jrc.ec.europa.eu/repository/handle/JRC126109
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    References listed on IDEAS

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    1. Habip Demirhan, 2019. "Effective Taxation System by Blockchain Technology," Contributions to Economics, in: Umit Hacioglu (ed.), Blockchain Economics and Financial Market Innovation, chapter 0, pages 347-360, Springer.
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    More about this item

    Keywords

    Capital gains taxation; cryptocurrencies; Bitcoin.;
    All these keywords.

    JEL classification:

    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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