The effects of the transformation of tax heavens to digital tax heavens on taxation

Cryptocurrencies that emerged with the rise of digital age are separated from all the previous payment tools as a peer-to-peer payment tool in which there is no central authority, thanks to the registration system and encryption technology they have in their designs. Due to their design technologies, there have been difficulties in regulation and taxation of cryptocurrencies by the authorities of the current legal and economic system. In this regard cryptocurrencies have attracted the attention of capital as well, which is in the search of increasing the amount of post-tax returns after the restrictions on the international capital movements with the globalization process. Cryptocurrencies can meet the functions about the advantageous tax regime and information sharing of tax heavens which aims to minimize the tax burden with their digital identity being outside the jurisdiction of tax authorities and their high level of identity protection. In that case, it is discussed cryptocurrencies, as an alternative to tax heavens, to be used as a digital tax heaven in the face of existing laws and international financial regulations. Cryptocurrencies that will be used as digital tax heavens might cause decreasing in tax revenues by causing tax noncompliance, especially through tax evasion. In addition, the issue of taxation of revenues obtained from cryptocurrencies draws attention as another problem to be addressed. Given these situations caused by cryptocurrencies, tax systems and other regulations need to be adjusted to the fact of cryptocurrencies.