Some of Japan’s largest businesses have urged the government to enact tax reforms in relation to cryptocurrencies, as the nation embraces Web3 and the world of crypto. The Japan Association of New Economy (JANE) has officially submitted a proposal for tax reform to the Tokyo government, with the aim of reducing tax rates in 2024 to stimulate growth and boost tax revenue.
Embracing Web3 and Crypto
JANE’s proposal encompasses various forms of taxation, specifically addressing the issue of crypto-related taxes and the growth of Web3. The organization argues that the current crypto tax system is driving promising Web3 companies away from the country, potentially leaving Japan behind in the Web3 sector. Urgent measures are required, according to JANE, to support these promising businesses and foster the development of the token-powered economy.
Support from Industry Leaders
JANE’s call for tax reform aligns with similar statements made by leaders from the Japanese IT sector and opposition party. The government has already shown a willingness to revise crypto tax laws for companies, which currently require them to pay taxes on unrealized gains. This means that companies with crypto holdings must pay taxes on the appreciation of coins throughout the fiscal year, regardless of whether they convert them to fiat currency. In contrast, most other countries only tax crypto profits when coins are traded for fiat. However, there is also a demand in Tokyo to reduce the tax burden on individual crypto holders. Presently, gains from crypto trading are treated as “other income” on tax returns, resulting in some high earners paying over 50% of their earnings in taxes. In many other countries, crypto is taxed under capital gains rules, with fixed rates of 20% for traders who surpass a specific profit threshold.
JANE has made specific requests to simplify the tax process for crypto holders. They recommend disregarding the market value of crypto assets in asset declarations and allowing traders’ losses to be deducted from income declarations. The organization also proposes the establishment of a separate self-assessment taxation system for transactions related to derivatives.
The ruling Liberal Democratic Party’s dedicated Web3 taskforce and crypto exchange groups have also made similar suggestions. The Japanese cabinet is scheduled to discuss tax reform, including crypto, in a meeting projected to take place in December.
