A cryptocurrency wallet: Is it “relevant material” for tax administration purposes?
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Date
2020
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Siber Ink
Abstract
This article shows that wallets storing cryptocurrency are intangible property
so that they ought to qualify as a ‘thing’ within the meaning of this term in
section 1 of the Tax Administration Act 28 of 2011, read with the definition
of ‘relevant material’ therein. This article shows further that cryptocurrency
ownership is transferred electronically by way of the relevant encrypted
ledger information being sent from one crypto user to another. It is argued
that this ledger comprises data messages within the meaning of this term in
section 1 of the Electronic Communications and Transactions Act 25 of 2002.
Accordingly, it is also argued that the digital log of communication pertaining
to the creation, storage and transfer of cryptocurrency ought to qualify as
information as defined in section 1 of the Tax Administration Act read with
the definition of ‘relevant material’. If this contention is correct in law, then
SARS’s extensive investigative powers entitle it to access the contents of a
taxpayer’s e-wallet. If a taxpayer fails to comply with a lawful demand by a
SARS official for access to data of a blockchain in a virtual wallet, then SARS
may exercise its powers of search and seizure. If so, then it is argued that
taxpayers’ privacy rights entrenched in section 14 of the Constitution of the
Republic of South Africa, 1996 ought to apply to all devices and databases
on which digital information is stored related to cryptocurrency transactions.
Consequently, a taxpayer ought to be entitled to challenge the validity of the
investigative power utilised by SARS by seeking to have the relevant legislative
provision declared unconstitutional on the basis that it does not pass muster
under section 36 of the Constitution
Description
Keywords
Cryptocurrency wallet, Tax administration, South Africa, Taxpayer’s
Citation
Moosa, F. (2020). A cryptocurrency wallet: Is it “relevant material” for tax administration purposes?. Business Tax & Company Law Quarterly, 11(3),21-28