NFTs have come a long way since they first emerged in 2014, and a negative first; a UK law enforcement agency becomes the first UK law enforcement outfit to confiscate NFTs.
NFTs and Tax Evasion
One of the widely used arguments by crypto and NFT naysayers is that digital assets can be used to launder money, defraud people and organizations, and finance malicious activities. Admittedly, the nature of digital currencies means that regulations are only catching up to them, and a lot of people use them as a means to avoid paying taxes – no doubt about that.
NFT and Crypto champions understand the positives and negatives of crypto technology, and they always argue that the pros of the technology far outweigh the cons. Consequently, not everyone understands that NFTs are more than just digital assets and artworks to people who believe in their worth; NFTs help level the field for newcomers to the art and crypto world.
Not everyone can afford to invest, transport, and store masterpieces from famous artists, a sizable chunk of the population don’t know how to navigate the art world. NFTs help makes their experience more straightforward. Additionally, for many people residing and earning a living in countries with leaders who have a questionable relationship with the rule of law and human rights, NFTs serve to protect wealth from authoritarian leadership. As much as NFTs are sometimes used for tax evasion, their positives far outweigh their negatives.
Her Majesty’s Revenue and Customs Seizes $1.8 Million worth of NFTs
The HMRC is a UK government revenue department, and they recently seized over $1.8 Million worth of NFTs in an alleged VAT fraud case. Value Added Tax (VAT) is a form of tax levied on goods, and the cost of this tax is usually borne at the point of sale for most items.
Three suspects were arrested on suspicion of attempting to defraud the tax system, and these suspects are being accused of utilizing different strategies like trying to claim back more VAT than they were owed, employing fraudulent identities, using unregistered phones, and doctoring invoices to conceal their identities.
According to HMRC deputy director of Economic Crime, Nick Sharp, “Our first seizure of a Non-Fungible Token serves as a warning to anyone who thinks they can use crypto assets to hide money from HMRC; we constantly adapt to new technology to ensure we keep pace with how criminals and evaders look to conceal their assets.”
What does this mean for the future?
At first glance, this development might not seem like a positive one for the NFT world, but it is. Legitimate NFT holders do not condone using these digital tools for fraud and malicious activities. Additionally, NFT regulations have been all over the place, and it seems like governments make them up as they go; this development from the HMRC might point to a possible concrete shift in the way governments approach NFT governance.