South Africa Joins Global Effort To Implement New Digital Asset Taxation Standards
The Crypto-Asset Reporting Framework (CARF) standard seeks to establish a comprehensive global system for the seamless exchange of tax-related data to combat tax evasion.
By Anna B Kiwanuka
South Africa has recently joined a coalition of 47 nations committed to adopting a unified global taxation standard for the digital asset industry by 2027. This collective effort, including prominent nations such as the United Kingdom, the United States, Mexico, Germany, France, Canada, Brazil, and Singapore, aims to expeditiously transition to the Crypto-Asset Reporting Framework (CARF) standard.
Crafted by the Organisation for Economic Cooperation and Development (OECD), the CARF standard facilitates the automatic exchange of information about ‘crypto-asset’ taxation. Aligned with the OECD’s mandate from the G20, the framework seeks to establish a comprehensive global system for the seamless and automated exchange of tax-related data to combat tax evasion.
The complexity of digital asset taxation poses a global challenge for regulators. The involvement of non-traditional entities such as exchanges and the facilitation of peer-to-peer transactions require specialized expertise from tax authorities, often in short supply.
A report indicates that in 2022, over 99% of digital asset traders did not fulfill their tax obligations. South Africa, in aligning with the new global standard, anticipates enhanced capabilities to address tax evasion within its borders.
In a collaborative statement, the participating nations expressed their commitment to incorporating the CARF standard into their domestic laws by 2027. The joint effort aims to strengthen tax compliance measures and counteract evasion, thereby safeguarding public revenues and reducing the burden on law-abiding taxpayers.
Notably, South Africa emerges as the sole African country to pledge the incorporation of the new standard into its domestic legislation. Other African nations have encountered challenges in grappling with digital asset taxation amid a surge in trading activities.
In a parallel development, Kenya responded to this challenge in July by implementing a new taxation regime through the Finance Bill. This legislation imposes a 3% tax on all digital asset transactions, including transfers of Non-Fungible Tokens (NFTs). However, the country’s blockchain community has contested these taxes, citing them as excessive. Additionally, the Blockchain Association of Kenya points out that the central bank’s anti-Bitcoin stance has led to financial institutions denying services to digital asset traders, further complicating the process of tax payment.