Developing a foundation for a globally coordinated approach to the taxation of crypto-asset transactions

Crypto-assets and blockchain technology have created much uncertainty within the field of taxation. While some jurisdictions have attempted to formulate responses, others have yet to meaningfully engage with the topic. In contrast to the taxation of the digitalised economy, a coordinated global approach to the taxation of crypto-asset transactions is notably lacking. Rather than focusing on individual jurisdictions, this study addresses the consequences of crypto-asset transactions within the international tax system. It begins by applying an adapted form of the constant comparison method traditionally employed in grounded theory research to a selection of crypto-assets white papers to inductively identify possible taxable events, and from these to develop ten transaction categories, each with definitive characteristics. These categories then form the basis of a doctrinal analysis of the nature within the international tax system of the income arising and its classification within the text of the articles of the model tax conventions. Finally, the study considers the potential future impact of measures to tax the digitalised economy. The study finds that while it is possible to classify each of the identified transaction categories within the articles of the model tax conventions, alternative constructions within treaties and existing differences in interpretation may still significantly impact the allocation of taxing rights. In addition, crypto-asset transactions may further challenge the role of the permanent establishment concept in determining taxing rights and contribute to base erosion. While such transactions may fall within the measures to tax the digitalised economy, the pseudonymous, decentralised nature of blockchain technology may frustrate the application of these measures. This study may inform individual jurisdictions in designing the scope and outcomes of a comprehensive response to crypto-asset transactions. It may also provide a basis for the classification of these transactions within the international tax system, and support the development of a globally coordinated response to the taxation of crypto-assets. Finally, it may contribute to the broader development of the taxation of the digitalised economy, in which crypto-asset transactions may play an increasingly significant role in the future