Good question @showoff . WATER coins are pseudo coins, just like the water we drink and then release again, not a blockchain but a database chain. In itself it does not hold a value, just like water to gold.
The WATER is just a way to measure activity. Your Steem balance is where it matters and this is public, so all inputs can be found on our transaction page on Steemit, and likewise, all transactions paid to you can be found on Steemit. You can't trade WATER anywhere outside of this mode, so we can always refer to the STEEM or STEEM DOLLAR because that is the holder of value, same as what Water is to Gold. You don't hold your wealth in water, though having water is important.
I am not a tax expert, but based on the application of WATER as simply a holder of activity, I think just focus on your Steemit page as a valid point of inputs and outputs for determining value.
For personal accounting of activity, you can keep a log if you want to make sure your activity is recorded correctly. In that there is 2 verifications, us and you. But there is always the added verification of everyone when you buy WATER coin as that is logged on Steemit.
Hope that answers your questions. I do think that governments mistreat bitcoin because they don't fully understand it. For example, it is easy to say that if you have Internet, you should be classed as a broadcaster and pay a license to broadcast, or to send email, need to pay a fee every time send an email, but gradually we learned that there is a broader perspective, and I think Steem and Steemit shows this.
As a note, from what I understand in the UK, you can only be taxed from the point of converting from bitcoin as an example to cash, so while in crypto it's in crypto, but again, I am not a tax expert and hopefully more people can chime in on this point.
Just like bitcoin, it is important to know whether locally you are allowed to use bitcoin or any related technologies and abide by them.