Japan’s ruling party, the Liberal Democratic Party, wants the government to carry out “immediate” tax reforms on cryptocurrencies.
According to an official announcement by the Liberal Democratic Party and a report by Japanese-language website 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.
The ruling party wants changes in crypto policy
The panel said that profits and losses from cryptocurrency transactions should be taxed separately. It added that the above issue “should be addressed immediately.” The report was forwarded to the party’s Digital Society Promotion department.
Currently, Japanese law stipulates that cryptocurrency traders must include gains and losses from cryptocurrency trading in their annual income declarations.
Cryptocurrency tax in Japan
Japanese taxpayers must declare all cryptocurrency-related income as “other income.” This means that while low-income earners can pay as little as 11% of their profits from cryptocurrency trading, those in higher tax brackets can pay more than 50%.
In most other countries that tax profits from cryptocurrency trading, investors must pay capital gains tax – just as they might for assets such as stocks and shares.
Activists have been urging Tokyo to change its stance for years. However, Prime Minister Fumio Kishida has recently taken a strong pro-web3 stance.
Kishida has opened a discussion on the sector, expressed a desire to reform tax laws and advocated NFT-driven economic growth. And this has already led to tax reform for corporations, which will no longer have to pay tax on “unrealized” profits.
This refers to coins that gain in value during the fiscal year, but are not sold for fiat coins during the same period.
What does the future hold for the sector in Japan?
If the Digital Society Promotion Department approves the tax reform for individual entrepreneurs, it will be forwarded to the Political Affairs Research Council.
If the council approves, the tax reform will become official Liberal Democratic Party policy. From there, lawmakers will be able to create a bill that will be presented to the National Diet.
All of these steps may be time-consuming, but none should pose a serious obstacle to the changes proposed by the web3 project team.
Japan’s ruling party has been in power since 1955, with 259 of 465 seats in the House of Representatives and 116 of 248 seats in the upper house, the House of Councillors.
As such, it seems to be a matter of “when,” not “if,” for Japanese cryptocurrency traders hoping for tax reform.
Web3 revolution in Japan?
The authors of the white paper say they want to put Japan “at the center of the web3 revolution.” They also said they strongly support the development of blockchain technology in social infrastructure projects. In addition to separating the taxation of cryptocurrency profits from income tax, the proposed changes would also allow investors to defer losses for up to three years.
The authors further suggested discussing Japan’s strict leverage trading rules , an issue that has been troubling Japanese exchanges for several years.
Experts in the Japanese crypto industry seemed pleased with the news, with some expressing the opinion that the white paper addresses many of their requests.
Astar network and Startale Labs CEO Sota Watanabe said the paper “comprehensively discusses” the main issues that the industry believes “need improvement.”
Genki Oda, founder of BITPoint and vice president of the self-regulatory Japan Crypto Asset Exchange Association, agreed with this opinion.
Oda said:
“Almost all the proposals have been included [in the white paper]. It is important to carry out [these reforms] in the future. We will take steps to make this a reality.“
