CAPE TOWN – Blockchain technology allows one’s Bitcoin transactions to be tracked by another party, according to Richard de Sousa, a partner at AltcoinTrader.
De Sousa was responding to questions from Business Report after media reports that the SA Revenue Service (Sars) was actively looking into ways of identifying people that were trading cryptocurrencies to establish if they were avoiding taxes due on their incomes.
He said there was software that was produced by companies that allowed you to track transactions if you had a starting point.
Bitcoin.com reported that Sars acting commissioner, Mark Kingon, revealed this during a conference organised by the Institute of Internal Auditors in Sandton. Kingon remarked: “The key thing is identifying people who are trading because it’s easy to say cryptocurrency gains must be deductible, but there are also those who lose. That’s why it’s important to identify the trader.”
De Sousa said the one thing you need to understand about Bitcoin, was that it was the most transparent and the most anonymous system.
“When we say the most transparent, we mean that the blockchain is open and anyone that has access to the internet can view every single transaction that takes place on the blockchain.”
“In other words, if Sars knew the Bitcoin address that you started from, they could track every single transaction that goes out of that address and they could track it on the blockchain and track it to where you moving it to.
“Crypto is not secretive it is extremely transparent, with the correct software and correct technical know-how, anyone can track these transactions because they are on a public ledger,” he said.
De Sousa said it should be noted that once criminals, kidnappers or tax evaders entered blockchain and started moving bitcoin around, they could be tracked and monitored.
“This is one of the beauties of the blockchain. They can track from exchange to exchange. The only thing, Sars wouldn't know is what they are selling Bitcoin for or buying it for, but they would certainly know every other blockchain-related transaction,” he said.
De Sousa said there were companies that had written software to allow tracking transactions adding that it had been done successfully even in South Africa. “I am aware of private tracking companies including ourselves that are tracking Bitcoin and monitoring the blockchain to eliminate fraud. So yes it is already been done internationally and locally.”
Sars announced earlier this year that it would continue to apply normal income tax rules to cryptocurrencies in the country.
In South Africa, the word “currency” is not defined in the Income Tax Act. Cryptocurrencies are neither official South African tender nor widely used and accepted in South Africa as a medium of payment or exchange.
As such, cryptocurrencies are not regarded by Sars as a currency for income tax purposes or capital gains tax. Instead, cryptocurrencies are regarded by Sars as assets of an intangible nature.
Sars said in a statement on April 6 that it expected affected taxpayers to declare cryptocurrency gains or losses as part of their taxable income.
“The onus is on taxpayers to declare all cryptocurrency-related taxable income in the tax year in which it is received or accrued. Failure to do so could result in interest and penalties,” read the statement.
- BUSINESS REPORT