New Assets, (Largely) Same Old Rules: The Taxation of Digital Tokens
Oxford Business Law Blog, 13 May 2022
2 Pages Posted: 5 Aug 2022 Last revised: 23 May 2023
Date Written: May 13, 2022
In this blog post, I highlight the fact that across jurisdictions, tax provisions specifically drafted to address the taxation of digital tokens are still quite rare, meaning that existing orthodox tax rules will have to be applied. However, care must be taken when applying tax provisions and one must be aware of the limits of "reasoning by analogy".
Some tax provisions make reference to specific assets or asset classes and it cannot be assumed that digital tokens which look very similar to these assets will inevitably fall under those provisions. For example, no matter how much a digital payment token looks like money and no matter how closely it can serve as such a substitute, one should not assume that a provision specifically referring to "money" will necessarily apply to digital payment tokens as well.
As a general observation, provisions imposing taxation tend to be quite broadly drafted so as to catch as many situations as possible. Activities involving digital tokens will tend to be caught by these provisions, even if they are not specifically referenced. On the other hand, provisions dealing with deductions, allowances, reliefs or exemptions (generally, anything that can potentially reduce tax liability) tend to be drafted rather more narrowly. Thus, one must be particularly careful in such situations and assess each case on its facts. It is most unlikely that such provisions will apply "across the board" to all forms of digital tokens.
Keywords: taxation, taxation law, tax law, cryptocurrencies, digital tokens
JEL Classification: K34, F38, H2, H20, H24, H25, H26, H27, H29
Suggested Citation: Suggested Citation