cryptonews.com
Japan’s ruling party, the Liberal Democratic Party, wants the government to carry out “immediate” crypto tax reforms.
Per an official Liberal Democratic Party release and a report from the Japanese-language media outlet CoinPost, the party’s web3 project team unveiled a “White Paper” on April 12.
In February, the government unveiled plans to allow venture capital firms to invest in domestic crypto companies.
Japan’s Ruling Party Wants Crypto Policy Changes
The team said that “profits and losses” from “cryptoasset transactions” should “be subject to separate taxation by self-assessment.”
And the team said the above issue “should be addressed immediately.” The report has been passed on to the party’s Digital Society Promotion unit.
Currently, Japanese law stipulates that crypto traders must include crypto trading profits and losses on annual income declarations.
What Are the Rules Surrounding Crypto Tax in Japan?
Japanese taxpayers need to declare all crypto-related earnings as “other income.” This means that while low-earning individuals can pay as little as 11% on their crypto trading profits, those in higher tax bands could pay over 50%.
In most other countries that tax crypto trading profits, traders need to pay capital gains tax on earnings – as they might do with assets such as stocks and shares.
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Campaigners have been urging Tokyo to change its stance for years. However, Prime Minister Fumio Kishida has taken a decidedly pro-web3 stance in recent times.
Kishida has talked up the sector, indicated a willingness to reform tax laws, and spoken in favor of NFT-powered economic growth.
And this has already led to tax reform for corporations, who will no longer have to pay tax on “unrealized” gains.
This refers to coins that appreciate in value over the course of a financial year, but are not sold for fiat in the same period.
What Happens Next?
If the Digital Society Promotion unit approves the tax reform for individual traders, it will be passed on to the Political Affairs Research Council.
If this council approves, tax reform will become official Liberal Democratic Party policy. From here, lawmakers will be able to create a bill to present to the National Diet.
All of these steps may well be time-consuming, but none should provide serious obstacles to the web3 project team’s proposed changes.
Japan’s ruling party has been in power since 1955. It holds 259 seats out of a maximum of 465 in the House of Representatives and 116 of 248 seats in the upper house, the House of Councillors.
As such, it now appears to be a case of “when,” not “if” for Japanese crypto traders hoping for tax reform.
Web3 Revolution on Cards in Japan?
The white paper’s authors claim they want to place Japan “at the center of the web3 revolution.”
The authors also said they “strongly support the development of blockchain technology” in “social infrastructure” projects.
As well as separating crypto profits taxation from income tax, the proposed changes would also allow traders to defer losses for up to three years.
The authors further suggested discussing Japan’s tight crypto leverage trading rules, an issue that has dogged Japanese exchanges for several years.
Japanese crypto industry insiders appeared happy with the news, with some opining that the white paper addresses “many” of their requests.
The Astar Network and CEO at Startale Labs Sota Watanabe said that the paper “comprehensively covers” the “main issues” that the industry felt “needs improvement.”
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Genki Oda, the Founder of BITPoint and the Vice Chairman of the self-regulating Japan Crypto Asset Exchange Association concurred. Oda said:
“Almost all of the [industry’s] requests have been included [in the white paper]. It is important to carry out [these reforms] in the future. We will take steps to ensure it becomes a reality.”