Japanese Crypto Industry Considers Decision To Call Tokyo To Reform Its Tax Laws

• – Japanese companies that deal with assets related to the crypto industry business have pushed the government to enact tax reforms, arguing that the existing approach is incompatible with international tax regulations.

According to CoinPost, the recommendations came from the Japan Crypto Asset Business Association (JCBA) and the Japan Virtual Currency Exchange Association (JVCEA), who jointly published a paper advocating for tax reform in 2023.

The organizations also spoke to the media and revealed their goals, especially emphasizing the necessity of streamlining the procedure for reporting cryptocurrency taxes. Additionally, it called attention to “inconsistencies” in the current system. The bodies have stated that crypto has a crucial role to play in the Web3 world, although noting that Japan’s legislation is at odds with “overseas crypto-asset tax schemes.”

Senior parliamentarians in the ruling Liberal Democratic Party (LDP), who are forming a Web3 task team, may take note of the last issue. The task force discussed the need for Japan to review its cryptocurrency tax laws in light of claims that overly rigorous protocols are driving businesses, talent, and capital elsewhere. Leaders of the opposition have also stepped up their appeals for reform.

The main issue is that cryptocurrency is now shown on tax returns as “other income.” Contrast this with the situation in other nations, where capital gains tax laws are frequently applicable to cryptocurrency. Profits from the cryptocurrency industry are frequently exempt from taxes until the coins are transferred to money.

However, the tax rate on cryptocurrency-related income in Japan (and under present regulations) is based on an individual’s overall income. This implies that crypto tax payments might go to about 50% in the case of wealthier earnings.

Contrarily, there is a flat 20% capital gains tax on currency trading.

JBCA claimed to have surveyed over 26,000 investors, and the results of that study demonstrate that its proposed tax changes will actually result in “an increase in the number of taxpayers” and “not necessarily a fall in national income” from the crypto tax.

These calculations, however, appear to take into account the notion that if tax reforms are implemented, there will be a rise in demand for cryptocurrencies.

The organization, which mostly advocates for businesses engaged in the cryptocurrency industry, asserted that “if things stay as they are, the taxation system will become a bottleneck for the expansion of crypto-assets.” The group claimed that this would impede “the development of products and services in Japan” and put the nation behind its competitors in Asia, Europe, and the United States in the Web3 era.

Additionally, it said that the level of oversight the crypto industry currently observes in Japan is “inconsistent” with the country’s tax laws, making it more “robust” than the conventional banking sector. As a result, the JBCA recommended that a milder tax scheme be implemented right now.

JVCEA represents domestic and foreign cryptocurrency exchanges that have registered with the Financial Services Agency, a regulatory body, or are in the process of doing so.