South Africa Poised to Make Crypto Work in Africa
South Africa seems to be gradually becoming the country other African countries are applying a ‘wait and see’ approach to in order for them to take the next step with regards to cryptocurrency regulation in their respective territories.
According to a recent report by pan-African bank, EcoBank, many African governments and regulators are being careful of both the risks and the potential positive impacts of cryptocurrencies and “…appear to be looking to their neighbours to regulate and innovate first, and learn from their mistakes, rather than being the first mover.”
South Africa is the focus at this point. The country’s tax agency, South African Revenue Service (SARS), announced in April that it will continue to apply normal income tax rules to cryptocurrencies and will expect affected taxpayers to declare cryptocurrency gains or losses as part of their taxable income. Not many African countries have even reached this stage in their interactions with cryptocurrencies. Though they are aware that revenue generation is key to their activities for infrastructural and other public servie developments, many governments are concerned that the anonymity of digital currencies facilitates money laundering and unwanted outward flows of capital. Hence, a breakthrough in this direction is going to spur many African countries into action.
To take its campaign a notch higher since tax enforcement in the crypto space could be daunting, South Africa’s SARS says it is taking a step in this direction by working on plans to track defaulters and tax avoiders through a specialized software. The effort to find a clear-cut way of identifying the traders who might be dodging tax was confirmed by the acting SARS commissioner, Mark Kingon, at a conference of internal auditors this week.
“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,” Kingon says according to a Fin24 report. He notes that SARS has certain ways of identifying the traders but it could be a bit difficult as some of them have foreign bank accounts and transact outside South Africa. He adds that if and when any defaulter is identified, a query would be lodged with SARS and the individual would be investigated.
The success of this effort would be meaningful in South Africa and beyond. Hence, many would be on the look out to see if SARS achieves its desired result.