Japanese Crypto Industry Urges Tokyo to Reform Tax Laws

Japanese companies involved in crypto assets are calling on the government to enact tax reform, claiming the current system is inconsistent with tax laws in other countries.

The proposal comes from the Japan Crypto Asset Business Association (JCBA) and the Japan Virtual Currency Exchange Association (JVCEA), through CoinPost he released a joint report calling for tax reform in 2023.

The

group also reached out to the press to detail its goals, which primarily focused on the need to simplify the crypto tax reporting process.It also pointed to “inconsistencies” within the existing system. . Also, in addition to pointing out that Japan's policy has not kept up with "overseas crypto-asset management schemes," the panel argued that crypto has an important role to play in his Web3 world. .

The latter point could attack a senior member of the ruling Liberal Democratic Party (LDP) who launched the Web3 task force. The task force also spoke of the need to reconsider Japan's cryptocurrency tax rules, amid claims that overly restrictive protocols are driving businesses, talent and capital abroad. They are raising their voices for change.

The problem is that cryptocurrencies are now classified as "other income" on tax returns. This is very different from other countries where cryptocurrencies are typically subject to capital gains tax. In many countries, crypto-related profits are not taxed at all until the coin is converted into fiat currency.

However, in Japan (and under current rules), the tax rate with which cryptocurrency-related income is taxed depends on an individual's total income. That means crypto tax payments among high-income earners could skyrocket to around 50%.

Foreign exchange transactions, on the other hand, are subject to a fixed capital gains tax of 20%.

The JBCA said it conducted an investor survey and spoke to more than 26,000 people, and data from the survey showed that the tax reforms proposed by the JBCA actually resulted in an "increase in the number of taxpayers" He argued that it showed that "it does not necessarily lead to an increase in the number of taxpayers." Declining “government revenue” due to crypto tax

The panel further claimed to have made "provisional calculations" based on a capital gains tax rate of 20%, and found that tax revenues would actually increase "by about 20%" under the system.

However, these calculations It seems to take into account the fact that demand for cryptocurrencies is likely to increase during tax reform.

The committee, which mainly represents crypto-related companies, argued that the tax system will become a bottleneck for the proliferation of crypto-assets if things continue as they are. The panel said this would hamper "development of products and services in Japan" and cause Japan to fall behind its Asian, European and American peers in the Web3 era.

Furthermore, the level of regulation that the cryptocurrency sector is currently complying with in Japan is “inconsistent” with existing tax laws, making the industry even “stronger” than in the traditional financial world. suggests. As such, the JBCA suggested that a more generous tax regime would be appropriate.

JVCEA represents a national and international cryptocurrency exchange that is registered with financial services regulators or is in the process of applying for an operating license.