IRS Commissioner Charles Rettig opines that NFTs are used for tax evasion. Recently, non-fungible tokens came into the limelight following the increased demand and the attractiveness of the sector. Other well-known influencers in the digital asset world have been pushing the NFT narrative. One of those influencers is Jack Dorsey, who sold his tweet as an NFT.
While new happenings have been pushing the rapid adoption of the sector, Rettig believes that bad players could be using the tokens to evade taxes. The official also explained that the token is not visible by design, and his statements have been received with mixed feelings.
NFTs could be aiding tax evasion
Rettig revealed this new information during the Senate Finance Committee meeting, where he criticized the token’s use for evading taxes. The commissioner was asked if improved reporting requirements for cryptos could close the tax estimation gap, closing in on $1 trillion.
The IRS commissioner explained that the growing sector was replicating itself, which could mean it was growing at an unexpected rate. He added that NFTs are known as cryptos collectibles and that they are not visible by design.
The digital asset space continues to receive criticism from the government as many nations fight through the effect of money laundering and terrorism financing, which has been allegedly linked to the rapid growth of the industry in recent times. Aside from security problems, the financial expert believes that cryptocurrencies have reduced the government’s taxes.
He shared that the US government was losing in on almost $1 trillion in taxation due to increased digital assets adoption. The government has not been able to keep track of taxes, which has led to it losing lots of money.
America records almost $1 trillion in tax evasion
Interestingly, the nation taxes crypto holders in terms of capital assets as opposed to it being a currency. This legislation means that profits on cryptos are taxed, alongside if users buy items with the digital asset. NFTs are slightly different from well-known fungible tokens like Bitcoin or Ethereum. The items show ownership of certain intellectual work, such as painting, tweets, images, and documents.
Recently, the industry has seen larger volumes coming into it as influencers and celebrities have used NFTs to sell their products and have made an impressive amount of money by auctioning these items.
This has caused IRS to divert some interests to the NFT sector as more people are becoming interested in the growing sector. People are selling NFTs for millions, following a popular painting, which sold for millions of dollars. Statistics have shown a massive increase in NFT trading volumes as it continues to attract new people interested in selling or purchasing digital artworks and the likes.
The IRS believes that traders would be heavily taxed following the enormous profits being made from selling NFTs, which could close the gap in the US tax evasion statistics. The regulators would likely push for more clarity to levy taxes properly.