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Takeshi Fujimaki, a Japanese lawmaker, has recently spoken in support of local crypto users burdened by heavy taxes. Fujimaki, who represents one of Japan’s largest political parties, Nippon Ishin, suggested four significant changes to the national taxation scheme currently applicable to the crypto space.
Fujimaki urged the authorities not to undermine the future of virtual currencies and the innovative technology behind them. He believes these measures, if introduced, would help to lighten the current tax burden on users. Thus they might also promote the mass adoption of digital currencies in Japan and bolster the further development of blockchain technology.
(https://www.shareicon.net/data/16x16/2015/12/02/680975_arrows_512x512.png) Lower tax rate
First of all, the lawmaker proposes to set a distinct tax rate of 20% on crypto gains. It should be noted that while virtual currencies are recognized in Japan as a legal method of payment, profits made on them are defined as “miscellaneous income” and must be reported to the national tax authorities. Such gains are currently subject to the tax in the amount up to 55% depending on the volume. Fujimaki explains it shouldn’t be high like this because trading cryptos is a risky business, and profits in this segment are not as stable as employees’ salaries. It’s no wonder that some Japanese crypto investors try to avoid this taxation by moving to other countries with friendlier tax regimes. The tax rate of 20% would put trading digital currencies in the same league as stocks, Forex and mutual funds.
(https://www.shareicon.net/data/16x16/2015/12/02/680975_arrows_512x512.png) Carrying forward losses
Fujimaki also recommends allowing crypto traders to carry forward losses they might suffer. He insists this is nothing but a fair move, since investors in other segments, including stocks and property, are allowed to resort to this strategy. Every year is different, and one never knows whether money will be made or lost. So, crypto traders should also have the right to make an adjustment for previous losses by deducting them from the total revenue, and pay tax on the difference.
(https://www.shareicon.net/data/16x16/2015/12/02/680975_arrows_512x512.png) Tax exemption for crypto-to-crypto transactions
The lawmaker suggests a tax exemption for cases when digital currencies are traded against each other. Such immunity from a tax on gains should promote the volume of crypto transactions and reinvigorate the market of digital assets, he believes. Besides, he criticizes the current practice of P/L calculations for every separate transaction, calling it extremely awkward and complicated.
(https://www.shareicon.net/data/16x16/2015/12/02/680975_arrows_512x512.png) Tax exemption for minor crypto transfers
One more tax exemption should apply to small payments made in virtual currencies. Fujimaki insists this is a crucial measure to encourage cryptos’ use as a form of payment in everyday life. At the moment, a customer choosing to pay for the goods or services with digital money is obliged to pay a gains tax if he converts currency from fiat to crypto. Such a stance would never promote mass adoption of cryptocurrencies, the lawmaker warns.
No matter how reasonable these proposals are, their chances to find a receptive ear are rather slim. Fujimaki raised this issue as far back as in June, when he first came up with the idea of amendments to the national crypto taxation regime, including the introduction of a separate flat 20% tax.
However, the authorities seem to be sticking to their current progressive tax rate and explain that the public might not accept such a change that would negate previous tax fairness.
Currently, countries including South Korea, India, Ukraine, among others, are also considering tax options for digital assets.
Source: CRYPTOVEST (https://cryptovest.com/news/japanese-legislator-defends-crypto-users/)