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Enforcing Taxes on Cryptocurrencies:Limits to Taxation in the Digitalized Economy

Author

Listed:
  • Hjalte Fejerskov Boas

    (Department of Economics, University of Copenhagen)

  • Mona Barake

    (Skatteforsk, NMBU)

Abstract

Digitalization challenges tax collection by allowing economic activity to move beyond the reach of domestic enforcement. We study this challenge in the cryptocurrency market by exploiting the introduction of domestic third party reporting, a cornerstone of modern tax enforcement. Combining micro data on crypto transactions, tax returns, and cross-border bank transfers from Denmark, we document pervasive crypto tax noncompliance. Third party reporting modestly increases self-reported income while simultaneously inducing a shift in activity beyond the regulatory reach of domestic tax authorities. This flight to opacity limits the effectiveness of unilateral tax enforcement and highlights the need for international coordination.

Suggested Citation

  • Hjalte Fejerskov Boas & Mona Barake, 2026. "Enforcing Taxes on Cryptocurrencies:Limits to Taxation in the Digitalized Economy," CEBI working paper series 24-21, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    • Handle: RePEc:kud:kucebi:2421
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    File URL: https://www.econ.ku.dk/cebi/publikationer/working-papers/CEBI_WP_21-24.rev.pdf
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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