The Colombian government wants citizens to declare their crypto holdings and tax collections, but industry insiders claim this will only force crypto advocates and their funds to move to platforms in the country.

Colombia’s crypto tax plan

Criptonoticias reports that Lisandro Junco Riveira, Director of the Colombian Tax Agency (known locally as DIAN), has announced the creation of a system of “retroactive sanctions” that could add up to $8 million to government coffers and force crypto holders to buy crypto Tax to be paid after trading and staking coins.

Junco Riverira told the crypto community that it’s time to “start paying taxes” on their crypto-related income.

The director added that those who have invested in cryptocurrencies are now required to declare them along with their other assets to the Colombian Ministry of Finance.

The report also adds that customers of crypto exchanges, including peer-to-peer trading platforms like LocalBitcoins, have received warnings from tax authorities asking them to declare their holdings or face punitive action.

Critics Reject Colombia’s Crypto Tax Plan

The retrospective nature of the measures means the historical activities of crypto traders and investors will be taxed, meaning transactions could be taxed as of 2016. And according to experts, this could prove to be a game changer for Colombian crypto enthusiasts.

In an interview with media outlet Enter.co, Mauricio Tovar, co-founder of Tropycus Finance, explained that the move could prove self-destructive. Tovar is said to have said:

“A lot of people want to file and pay taxes. But it seems arbitrary to me that a week ago we issued a policy aimed at sanctioning the activities of people from six years ago.”

Tovar added that this type of regulatory activity will eventually “scare off” wealthier investors with significant capital held in cryptocurrencies far from Colombia. Instead, they would simply shift their investments to countries with more favorable regulations, he argues.

Tropycus CFO added that “fair tax payment” schemes can actually benefit both DIAN operations and the crypto sector, which also craves legitimacy. He concluded:

“People respond to incentives. The government should create positive incentives for something to happen.”

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