As Bitcoin and other digital currencies became more relevant for the world’s financial system, numerous countries have started regulating the cryptocurrency market. One of the most important efforts was focused towards crypto taxation policies.
Now, recent reports indicate that the Japanese Tax Commission is unsatisfied with Japan’s current crypto taxation system, and is urging the country’s National Assembly to introduce new guidelines. This is great news for the Japanese crypto community, granted that until now, reporting crypto gains and investment profits was a confusing and exhausting experience. This aspect discouraged crypto users from disclosing their taxes, and put them at risk.
To put things better into perspective, the issues are mostly related to the lack of standardization in how transaction data is stored between exchanges, alongside the constant market price volatility. Additionally, the taxation system considers crypto-based profits as miscellaneous income. As such, the taxes rates are high, and often range between 15-55%. Current legislation dictates that tax rates are to be calculated based on the profits above the threshold of 200,000 yen.
As Japan’s crypto market is booming, this taxation system is no longer feasible for both the government and its citizens. With this in mind, Minoru Nakazoto, who is the president of the country’s Tax Commission has mentioned: “Since it is necessary to take into consideration frameworks other than the taxation system and business practices, we will hold a small meeting of experts to deepen the discussion while listening to outside opinions.”
Luckily, Japanese officials have shown they’re willing to amend the current system, and adopt a cryptocurrency policy that is beneficial to crypto users, and capable of encouraging innovation in the industry. For instance, in mid-2017, the government has introduced a new policy meant to remove the 8% consumption tax that people had to pay on all bitcoin transactions.
It is also important to point out that Japan’s Financial Services Agency (FSA), the main regulator for financial matters, has announced plans to expand its cryptocurrency team. This will help it keep a closer watch on the market, and promote the interests of the digital currency community. This is especially relevant since the number of companies applying for crypto exchange licenses is bound to skyrocket in 2019.
Other countries like the United States are dealing with similar issues. According to the cryptocurrency community there, the IRS has imposed strict, yet confusing guidelines, hence discouraging citizens from reporting their crypto gains.