The New Zealand tax authority is turning its eyes to the digital currency industry. The Inland Revenue Department (IRD) has requested all cryptocurrency firms to turn over their customers’ personal details and the type and value of their digital currency holdings for tax purposes.
New Zealand has had a checkered history when it comes to digital currency taxation. In July 2018, the IRD declared that it would be treating digital currencies as property for tax purposes. This controversial decision meant that digital currencies were liable to a 15% goods and services tax when changing hands in New Zealand.
Nearly two years later in February 2020, the IRD announced that it would amend the taxation rules and do away with the taxation policy.
Now, the agency is once again turning its focus on the digital currency industry, this time in an effort to ensure that all digital currency holders meet their obligations.
In a statement shared with Radio New Zealand (RNZ), the agency stated, “IRD is requesting this information to enhance our understanding of the cryptoasset environment in New Zealand so we can work out how best to help taxpayers meet their income tax obligations.”
The information gathering process is still in the early stages and it’s too early to say what the response from the firms will be, the IRD said. It also urged digital currency holders to make voluntary disclosures if they were concerned they had not met their tax obligations in the past. Those who want to gain more certainty about how the tax law applies specifically to their situations can apply for a ruling, although this attracts a fee.
Janine Grainger, the CEO of local exchange Easy Crypto expressed her disappointment at the new requirements. Speaking to RNZ, she said she was not surprised by the IRD, but she was disappointed.
“I guess [IRD] is just widening its net of the tax base and crypto assets are something that is definitely growing in popularity and we’re seeing a huge increase in New Zealanders getting involved.”
Grainger said the new requirements were a breach of the customers’ privacy and autonomy.
“While many people might think ‘I have nothing to hide therefore, what do I care?’ the point of privacy isn’t to aid people who have something to hide, it’s to ensure we have a fair, open and free society.”
The IRD follows in the footsteps of the Internal Revenue Service (IRS) which has increased its efforts to tax digital currency holders in the U.S significantly over the past two years. In 2018, the IRS obtained a court order requiring Coinbase to hand over data for at least 13,000 customers.