A prominent member of the House of Councillors of Japan and acting President of the Japan Restoration Committee, Takeshi Fujimaki has recently stated his opinion regarding the negative effect of the country’s tax system on the crypto industry. Fujimaki is of the strong opinion that Japan’s tax system is slowing the development and adoption of blockchain technology and cryptocurrency.
Financial Supervisory Authority Proposes New Tax System
Recently, Japan’s Financial Supervisory Authority proposed tax reforms which are designed to ease the trading, spending and holding of crypto investment without having to worry about unfriendly crypto tax laws.
Speaking on the proposed tax system, Fujimaki stated that:
“Today I received an explanation of the Financial Supervisory Authority’s submission bill. One is a crypto asset related bill. I asked some points about ‘the bill from the viewpoint of customer protection and the viewpoint of promoting innovation.’ It is the tax system that inhibits the development of cryptocurrency and blockchain.
If you want to promote cryptographic assets and blockchains, the FSA is also making a request of the tax authority.”
This proposed tax system reportedly notes that cryptocurrencies are generally used in different ways. Each of these ways generates a different type of transactions. As a result of this, all crypto transactions shouldn’t be taxed similarly.
According to a local news media, the list of transaction type recommends for tax exemption and inclusion under the proposed tax reform includes:
If someone receives their salary in Bitcoin or other cryptocurrencies, they should be fully taxed.
If someone reaps a trading gain, they should not be fully taxed.
It is not uncommon for traders to get stuck in a losing streak for years. As a result of this, it is important that Loss carryforward deductions should get applied, just like it is done with other assets such as stocks and mutual funds.
The current tax law in Japan doesn’t allow crypto traders to carry over trading losses to the following year. So in case, a trade records a negative balance for the present year, and the next year such trader to records a positive balance the following year. If the overall profit is still a negative one, such a trader will still have to pay full tax.
Tax Exemption For Crypto-to-Crypto Trading
Since calculating the profit and loss for each and every crypto-to-crypto trade is not straightforward and requires some level of experience and expertise at times, it is highly recommended that trading between cryptocurrencies should be tax-free. This will also help to increase trading volume and stimulate the market,