During the Upper House budget committee meeting that took place on June 25 in Japan, the Japanese Finance minister and Deputy Prime Minister said they would change how crypto transactions are currently taxed in Japan.
SEE: Bitcoin News Crypto Currency Daily Roundup June 26
As reported by Reuters, the minister, however, thinks the public might not accept this change in taxation of cryptocurrency transactions. Currently, all gains as a result of crypto transactions are simply taxed as miscellaneous income which is subject to a comprehensive taxation whereby the tax rate is arrived at as per the amount including other salaries like income.
According to the explanation by the National Tax Agency (NTA), Japan has about 7 income tax brackets which have tax rates that range from 5%-45% on earnings. However, in addition to these progressive tax rates, there is a 10% local inhabitant tax.
Therefore, it means cryptocurrency traders could pay a whole 55% in capital gains tax. During the meeting, Taro Aso went on to note that the cryptocurrency position in the financial sector is simply uncertain internationally. He commented on the development of blockchain technology and noted its importance but was quick to highlight that it may be controversial supporting the technology as it underlies cryptocurrencies.
The Change to a Uniform Tax Rate
The proposal by the finance minister is that crypto transactions be taxed through a separate settlement taxation which is different from the current classification under miscellaneous income. In other words, crypto traders will have a uniform tax rate just like stock traders. At that point, Aso expressed his concerns over the reaction from the public because of issues of tax fairness.
The change means it will bring the current 55% tax rate to 20% flat tax for crypto transactions. The reason is that capital gains in Japan from sales of some securities are separately taxed from the other sources of income just at a flat rate of 20% (5% local inhabitant’s tax and 15% national tax).
However, there has been constant criticism from various participants on the declaration by the Japanese government that crypto profits be taxed as miscellaneous income.