There are more than a few countries in the world where cryptocurrency is largely frowned at. China, for example, isn’t the most receptive to crypto as the government not only openly condemns it but also tries to pass laws that ensure that the growth of the cryptocurrency sector is as stifled as possible. Even though there is no legislation against crypto in the United States, the country’s SEC is also a bit on the fence about the sector.
Japan, however, is one of the most liberal countries with regards to crypto. In April 2017, the country officially recognized Bitcoin and cryptocurrency in general as legal, to be governed under the Payment Services Act. In December of the same year, the National Tax Agency (NTA) also formally classified profits made from crypto as “miscellaneous income” and ruled that such income be taxed between 15%-55%. This is probably the reason Japanese traders have decided to hide their cryptocurrency gains.
Japanese Traders Don’t Report Crypto Profits
According to some reports, at least 30 different cryptocurrency businesses and about 50 persons have either underreported their proceeds or have not been reporting them at all, for a few years now. Japanese law clearly states that all individuals and businesses who earn above 200,000 yen – $1850 – annually are expected to report such earnings. However, more than a few people have not been reporting this, supposedly due to the 55% tax attached. According to authorities, the undisclosed funds add up to about 10 billion yen ($93 million).
Crypto Will Face More Scrutiny
The tax evasion discovery didn’t just start and since last year, the Japanese government has been creating a new system that will allow the NTA to officially collect information from the country’s crypto exchanges on suspected evaders. The information will include their names, addresses, individual identification numbers and some other personal information.
At the moment, all intermediaries that the NTA requires information from are not exactly mandated to do so compulsorily. If an exchange feels they have enough reason to refuse to share the information, they have a right to do so. To ensure that privacy is upheld even when the new law is finally implemented, these exchanges will still be allowed to challenge a request made by the NTA through a proper appeal. The NTA will also only ask for data for suspected tax evaders who have earned at least 10 million yen – ($88,700).
The NTA declared as the conclusion from a survey that more than 300 persons disclosed they made about a 100 million yen from various cryptocurrency businesses and deals IN 2017. This was probably a direct effect of the 2017 surge when Bitcoin hit its all-time high of almost $20,000.
Furthermore, the government is also looking to pay more attention to Initial Coin Offerings (ICO). The country’s financial authority, the Financial Services Agency (FSA), is looking to create and enforce new and sterner regulations governing these ICOs to protect investors and stakeholders from fraud. When this is properly implemented, all institutions that wish to have an ICO will be mandated to first register with the FSA. This decision was made because of a few widely known duplicitous ICOs in other parts of the world that have defrauded innocent investors.
Crypto Taxes Should Probably Be Reduced
A few months ago, the FSA was asked by the Japan Association of New Economy (JANE) to cut down the existing tax percentage for crypto businesses. JANE asked that tax on crypto be reduced to 20%, which is the official rate for stocks. In addition to this, the agency was also asked to completely leave crypto-to-crypto transactions untaxed.