North American Chinese, Take Note! Trudeau Plans to Increase Capital Gains Tax, CRA Targets Cryptocurrency Profits

Canadian Prime Minister Justin Trudeau has proposed raising the capital gains tax from 50% to 66% for Canadian taxpayers with annual earnings exceeding $183,000. The Canada Revenue Agency (CRA) is actively seeking uncollected taxes on cryptocurrencies. The agency estimates that there is nearly $40 million in undeclared tax revenue related to cryptocurrencies.

According to the National Post, the Canada Revenue Agency is attempting to recover about 54 million Canadian dollars, approximately $39.5 million, related to undisclosed cryptocurrency transactions and profits.

Sahil Behal, Director of Compliance at the Canada Revenue Agency, revealed that approximately 400 audits and investigations related to crypto assets have already commenced. He noted that these investigations stem from the tax period of 2023-2024. He also mentioned that the agency still faces significant challenges in educating the public about the tax responsibilities associated with crypto assets.

The Canada Revenue Agency is closely monitoring the U.S. Internal Revenue Service (IRS), albeit slightly behind its American counterpart. The IRS recently released a draft of Form 1099-DA, which aims to detail the earnings from brokered crypto asset transactions, and is renowned for its comprehensive audit requirements.

A tax attorney told foreign media that the Canada Revenue Agency has been reluctant to provide guidance on how to report.

"Up until last year, or perhaps even earlier, the Canada Revenue Agency knew almost nothing about cryptocurrencies," the attorney said.

He continued, "Cryptocurrency is a commodity, plain and simple. They don’t tell you how to tax it, they don’t tell you it needs to be taxed, and you need to report it. The lack of guidance from the Canada Revenue Agency is the reason for this. How are you supposed to know it needs to be taxed?"

This news comes as Trudeau and his party plan to raise the capital gains tax in Canada.

Media reports emphasize that the proposed tax hike targets businesses and wealthy individuals, but anyone with annual earnings reaching 250,000 Canadian dollars, equivalent to $183,000, will be affected.

Trudeau and his party propose to raise the capital gains tax rate from 50% to 66% in the upcoming budget.

Bloomberg cited a report from the Canada Revenue Agency stating, "Even the dead are not spared from the rise in Canada's capital gains."

Furthermore, Bloomberg highlighted a survey by Nanos Research Group, which found that 45% of Canadians believe the tax increase would harm the economy and stifle innovation.

While 38% think the capital gains tax is fair, the rest are uncertain of its impact.

Meanwhile, as Trudeau pushes forward with plans to raise the capital gains tax, U.S. President Joe Biden's administration is also seeking to double the tax rate.

If President Biden succeeds, the capital gains tax rate could skyrocket to 39.6%.