How Tax Authorities Will Use DAC8 Data

Understanding how tax authorities will use DAC8 data helps CASPs appreciate the importance of data quality and the downstream consequences of their reports.

Primary Uses

Tax authorities will use DAC8 data for several primary enforcement purposes. Tax assessment verification involves comparing DAC8 data against individual tax returns to identify unreported crypto income. Risk profiling uses patterns in DAC8 data to build risk models that identify taxpayers likely to be non-compliant. Revenue estimation involves analyzing aggregate DAC8 data to estimate the crypto tax gap and prioritize enforcement resources. And policy development uses insights from DAC8 data to inform future tax policy decisions regarding crypto-assets.

Data Analytics Capabilities

Modern tax authorities increasingly use advanced analytics, including machine learning and artificial intelligence, to process large datasets. DAC8 data will be combined with CRS, FATCA, and national data sources to create comprehensive taxpayer profiles. Anomaly detection algorithms will flag unusual patterns, such as users with high transaction volumes but low declared income.

Impact on Taxpayers

DAC8 data will make it significantly more difficult for taxpayers to underreport crypto income. Tax authorities will have independent verification data for transactions conducted through CASPs, and the automatic exchange mechanism ensures that this data reaches the relevant jurisdiction regardless of where the CASP is located.

Data Quality Matters

For tax authorities, the value of DAC8 data depends entirely on its quality. Reports with missing TINs, incorrect classifications, or inaccurate amounts reduce the data's usefulness for enforcement. Tax authorities will therefore prioritize data quality in their compliance reviews of CASPs.

Conclusion

DAC8 data will be a central tool in tax authorities' enforcement arsenals. CASPs should understand that the quality of their reports directly affects the ability of tax authorities to function effectively, and that poor data quality will attract enforcement attention to the CASP itself.