Cryptocurrencies have hit abysmal lows since last year when Bitcoin and several other cryptocurrencies witnessed sky-high rates. As a result, many of the investors gained high profits from their investments in all parts of the world. Among these were the two young miners from Troms who accumulated a large amount of wealth by mining cryptocurrencies in a barn using high powered mining equipment. Reportedly, they owned 34 bitcoins as of December last year. At that time, those bitcoins were worth about $5.5 million. However, the latest reports show that both of those miners have reported incomes of less than $20,000 USD.
Philip Eriksen and Roy Arne Olsen are two 22-year-old Bitcoin miners from the Norwegian municipality of Harstad. After having boasted of owning 34 Bitcoins, their reported incomes for 2017 of less than $20,000 USD, which at that time were worth about $657,000, seems to be falsified. This drew a lot of attention from the local media as well as national media. After the prices of Bitcoin sky rocketed, this what Olsen had to say in a local website which roughly translates to,
Having an unrealized million wealth in cryptocurrency after two years is a fantastic mood feeling.
Mr. Eriksen and Mr. Olsen both reported NOK 0 million in wealth and taxable incomes of NOK 105,000 and NOK 150,000 respectively. Mr. Eriksen has to pay NOK 29,000 in taxes for 2017, and Mr. Olsen is required to pay NOK 45,000.
So where did the Bitcoins go?
Eriksen and Olsen were also interviewed by a newspaper in which it was reported that Philip had used some of the profit in order to buy a car, a Rolex watch and an apartment in tromso. However, recently both of them want no further attention from media and deny to make an comment on the matter. Both of them have been questioned how they could have owned previously mentioned amount and not report it to the taxing authorities. To which they also refused to give remarks about. Eriksen had previously also revealed that many people choose not to reveal their assets on the tax reports. He said,
You get an additional tax if you do not report, but it’s a little frightful for the Tax Administration that they do not know who has bitcoin and not.
Astrid M. Dugstad Tveter who is a section director in the Tax Directorate implied that it is each individual person’s duty to report what kind of taxable assets he/she holds. She said,
The person who has bought, sold, mined or has values placed in virtual currency, such as bitcoin, must report this in the tax report.
She also told that many of the individuals that do hold cryptocurrencies fail to report them to evade tax. If they do not exchange their crypto to gain profits, chances are their assets will remain tax free. However, if they cash in their profits, they would have to produce the record of all previous transaction and if not mentioned on the tax report they will be fined.
A challenge with crypto currency is that the Tax Administration does not get this automatically reported by a third party, as with other types of basic data. The experience is that it is often made wrong, both deliberately and subconsciously, with such information.
She added on,
The tax office generally has access to information from more sources than the information we receive from taxpayers through the tax report and uses different control methods, both in terms of tracking up values and to check whether taxpayers have provided correct and complete information.
In conclusion, cryptocurrencies have allowed multiple individuals to evade taxes in the past. Many others have consorted to it ship their illegally accumulated wealth overseas. So the big question is that are Eriksen and Olsen trying to hide their digital assets to evade tax or did they previously boast of owning more crypto than they actually did?