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One of the many things that amazes people about Norway is the fact that tax returns are public. For economists, this means there is a treasure trove of data to work with.

Tom Meling, Magne Mostad and Vestre did just that for a paper just published by the National Bureau for Economic Research, comparing tax returns with data they obtained through authorities from crypto exchanges.

Add to that surveys on crypto ownership and data on enforcement actions by the Norwegian Tax Agency, and you have the raw material needed to investigate whether the allegations of mass tax evasion by crypto people are true. And lo and behold:

We have found that crypto tax non-compliance is widespread, even among investors trading on exchanges that share identifiable trading data with tax authorities.

What exactly is “widespread”? The paper estimates that 88 percent of all Norwegian crypto owners do not declare their hopium to the tax authorities.

Based on the total number of self-reported crypto holders in Norway, the newspaper estimates that 6 percent of the Norwegian population (about 5.4 million in 2022, when the study period ended) were “crypto tax non-compliancers.” If the researchers mean only the adult population, we are talking about 250,000 people.

Another startling finding of the study is that “crypto tax non-compliance is prevalent among young, male, and urban individuals.” Truly shocking stuff.

However, failure to disclose holdings is obviously different from tax evasion, even though both are illegal. Many people hold such small amounts or are simply so underwater with their “investments” that they don’t actually owe any taxes.

Estimating the extent of unpaid taxes is difficult because the information is apparently not disclosed to the authorities, the surveys do not provide information on the average size of Norwegian cryptocurrency holdings, and foreign cryptocurrency exchanges – where most Norwegians also trade – do not disclose any information.

But the researchers tried it and came to the conclusion that the value is not particularly meaningful.

Using a partial identification approach, we construct lower and upper bounds of $200 and $1,087 for the average value of tax evasion of all crypto tax evaders.

In other words, even though many crypto investors do not declare their cryptocurrencies, they still have to pay a modest amount of tax. This result suggests that tax enforcement strategies related to cryptocurrencies need to be targeted or low-cost for the benefits to outweigh the costs.

While this is true, focusing on the average level of tax evasion may obscure the overall extent.

Assuming that the 6 percent figure refers only to the adult population and choosing the lower estimate, the total missing taxes would amount to over $50 million, or around NKr 530 million in 2022. At the upper end, the missing taxes would be $272 million, or NKr 2.8 billion.

Given the Norwegian government’s tax revenue of NOK 721 billion in 2022, this is not much, but even at the lower limit it would still be enough to finance at least six new kindergartens.

And if you extrapolate the results to more important countries, a lot of money is at stake. No wonder Elizabeth Warren and Bernie Sanders are calling for the IRS to be tightened.