Here in my country which is now an upcoming tiger economy (though we are still classified as a third-world country), we are free to participate in Bitcoin both buying and selling as the government is treating Bitcoin just like any other foreiign money.
However, I am sure that only a very, very small fraction of us are declaring our Bitcoin income. It seems to me that the government is not that interested to get strict with individuals as long as they can tax the Bitcoin exchange provider for the service rendered.
I am then wondering the situation with other countries. Can your government really be able to track if you never declared gains made from Bitcoin transactions?
Government can track your transaction because we know that it is traceable on blockchain, if you owns that wallet and that wallet has your own name attached to it. but their are wallets that you can withraw and atm's to change bitcoin to fiat money. Governments in your country are sure using bitcoin to earn a lot for themselves, it has a high chance before you joined bitcoin, they know bitcoin already and they use it for a long time, Governments will sure not slip every opportunity to make income not for their country but for their own profit.
What would you expect on the things that government do?They wont really make any chances for someone to skip to their obligations or which they do saw that they can able to make money too. We can say blockchain is on public and can be traced up but this would still be a hard thing and this is why most governments doesn't really like bitcoin after all.They do know that tracing such thing would be difficult.