In order to reduce the negative impact of taxation on Japan’s local crypto market, the government hinted on its plans to reduce taxation on crypto investments.
Back in October, a tax experts committee was put together for the purpose of counselling the government in matters of taxation. This committee helped the government to see the benefits of simplifying the process of tax disclosure for cryptocurrency investments.
Before this time, a statement was released by a local analyst, and it states:
“If the rapid growth of the cryptocurrency sector in late 2017 is considered, 331 is a number that is simply too low to be true. A large portion of cryptocurrency investors probably did not declare their earnings to the government.”
A lawmaker as well as a congressman in Japan named Takeshi Fujimaki, this week, recommended that the taxation policies should undergo changes in four major areas in order to make the crypto market reinvigorated.
Decrease in Tax Rates
It is difficult to tax profits from cryptocurrency because of the market’s high volatility. It is not strange to see an investor lose all their earnings in a single day.
In order to lessen the weight investors carry and out of respect for the nature of the digital assets market, Fujimaki, the congressman, suggested the changes below:
- All Crypto profits should be taxed a fixed rate of 20 percent instead of 55 percent.
- Losses should be carried forward until all digital assets are cashed out.
- For all crypto to crypto transactions, there should be no taxes.
- Small payments with digital assets should not attract any tax rate.
These four suggested changes will give rise to an improved market experience for investors and also make the crypto market fair for trading activities.
The second rule change is beneficial to crypto investors because the already existing tax policy across various major crypto markets such as Japan, USA etc., is the same and requires investors to pay taxes on every gain they make in a particular year, regardless of any losses recorded in the previous year.
In reverse, every gain acquired by an investor in the year before must be taxed, even if they lose it all the next year.
This rule change comes as a relief to investors, helping them to be free of high taxation as they make investments in the crypto market.
Fujimaki stressed that the changes proposed for taxation would bring about improvements to the local crypto market and possibly repair damaged sectors.
The lawmaker also said that the suggestion to free crypto to crypto transactions from taxation is to enable exchanges have an increased daily volume. Here are his words:
“In order to increase the volume of transactions between virtual currencies and to revitalize the virtual currency market, trading between virtual currencies should be tax exempt.”
How Does this Influence South Korea?
South Korea is behind the US and Japan as the third biggest cryptocurrency exchange market in the world. It is well known that the cryptocurrency regulatory policies adopted by Japan are also practised in South Korea.
Therefore, the suggested changes for the Japanese cryptocurrency market, if carried out, could inspire the key exchanges and startups in South Korea to approach their government for the implementation of such policies in their local market.