Japanese Crypto Industry Urges Tokyo To Reform Tax Laws

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Japanese companies related to crypto assets have urged the government to carry out tax reforms, claiming that the current system is not in sync with the tax rules of other countries.

The proposals come from Association of Crypto Asset Companies of Japan (JCBA) and the Japan Virtual Currency Exchange Association (JVCEA), which, according to CoinPost, published a joint report calling for tax reform in 2023.

The agencies also addressed the press and explained their goals, which were primarily focused on the need to simplify the crypto tax filing process. He also noted “inconsistencies” within the existing system. And, in addition to noting that Japan’s policy is out of step with “foreign crypto asset tax systems,” the agencies insisted that cryptocurrencies have a key role to play in the world of Web3.

This last point may well draw the attention of top lawmakers from the ruling Liberal Democratic Party (LDP), which has launched a Web3 working group. The task force has also spoken of the need to reconsider Japan’s crypto tax rules, amid claims that overly restrictive protocols are forcing companies, talent and capital to go abroad. Opposition leaders have also been vocal in their own calls for change.

The fact of the matter is that cryptocurrencies are currently classified as “other income” on tax returns. This is quite different from the picture in other countries, where cryptocurrencies are generally subject to capital gains tax rules. In many nations, cryptocurrency-related earnings are not taxed at all until the coins are converted into fiat money.

But in Japan (and under current rules), the rate at which cryptocurrency-related income is taxed depends on an individual’s total income. This means that crypto tax payments, in the case of people with higher incomes, can increase up to around 50%.

Forex trading, by contrast, is subject to a flat 20% tax levy on capital gains.

The JBCA stated that it had conducted a survey of investors, speaking to more than 26,000 people, and stated that the data from this survey showed that the tax reforms it was suggesting would actually lead to “an increase in the number of taxpayers” and “not necessarily lead to a decrease in national revenue” from the crypto tax.

The agency further claimed that it had made “test calculations” on the basis of a 20% capital gains tax and found that tax revenues would actually increase under this system “by about 20%”.

However, these calculations seem to have taken into account the fact that there would likely be an increase in demand for cryptocurrencies if the tax reforms were carried out.

The body, which mainly represents cryptocurrency-related businesses, stated that “if things continue as they are, the tax system will become a bottleneck for the spread of crypto assets.” This would hamper the “development of products and services in Japan” and leave the country behind its Asian, European and American counterparts in the Web3 era, the agency said.

He further added that the level of regulation that the crypto sector in Japan was now subject to was “inconsistent” with existing tax rules, suggesting that the industry was becoming even “more robust” than the world of traditional finance. As such, the JBCA suggested, a more lenient tax system was now appropriate.

The JVCEA represents national and international crypto exchanges that are registered with the regulator Financial Services Agency or are in the process of applying for an operating permit.
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Learn more:
– Bitcoin ATMs return to Tokyo and Osaka for the first time since 2018
– Stop your crypto operations in Russia, Washington tells Japanese exchanges and miners

– Japanese fiat banks are likely to get permission to handle crypto starting in the fall
– Japanese crypto exchanges want to get rid of restriction on token listing protocols

– Japan’s Prime Minister is reported to be open to the idea of ​​cryptocurrency tax reform
– Two crypto tax proposals defeated in Portugal, but the government likely won’t follow up with its own bill

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