At the international Web3 conference "WebX," a pivotal discussion focused on "Tax Reform for Cryptocurrencies," addressing pressing issues and future prospects for cryptocurrency taxation in Japan. Organized by CoinPost Co., Ltd. and hosted by the WebX Executive Committee, the session featured core members of the Japan Cryptocurrency Business Association (JCBA) Tax System Review Committee, LDP lawmakers, and university professors specializing in cryptocurrencies.
JCBA’s Tax Reform Proposal
The JCBA presented a detailed "Request for Tax Reform for 2025" to the government, highlighting four primary areas of concern:
Takeshi Saito, CEO of pafin Inc., JCBA advisor, and chairman of the Tax System Review Committee, emphasized that the reform of individual cryptocurrency income taxation is the top priority. He expressed concerns about the current miscellaneous income classification, which does not allow for loss offsets against salary or carry forward losses.
Capital Gains vs. Miscellaneous Income
The discussion also explored the potential classification of cryptocurrency transactions as capital gains, rather than miscellaneous income. According to Associate Professor Ayane Izumi of Toyo University, the current treatment under the Payment Services Act—viewing crypto assets solely as a means of payment—does not fully capture the investment and governance functions of certain tokens.
Izumi suggested that there is room to categorize some crypto assets as capital gains, similar to land, buildings, and stocks, which are taxed on the difference between acquisition and transfer prices. This shift could align the taxation framework with the evolving nature of crypto assets, which include investment properties and governance roles.
Path to Reform
LDP Deputy Secretary-General Masanobu Ogura outlined three critical factors for achieving the proposed tax reforms:
Ogura highlighted that separate taxation for investments recommended by the government should also apply to cryptocurrencies, advocating for recognition of cryptocurrency investments as beneficial for asset formation. He urged ordinary investors to engage with local Diet members to support these reforms.
Industry Perspectives and Concerns
Coincheck CFO Keigo Takegahara argued that the current miscellaneous income classification fails to incentivize tax payments. He advocated for separate taxation with provisions for loss offset and carryover deductions to enhance compliance.
Takeshi Saito raised concerns about potential negative impacts of introducing cryptocurrency ETFs if they were subject to separate taxation. He warned that such a move could lead to a decline in physical asset investments and undermine the Web3 ecosystem. Saito emphasized that tax disparities could result in traditional financial institutions absorbing cryptocurrency market profits, stifling future innovation.
Looking Forward
Representative Ogura acknowledged the need for a new legal framework that accommodates the multifaceted nature of crypto assets. He criticized the current reliance on the Payment Services Act, arguing that it fails to recognize the diverse roles of crypto assets as payment methods, investment targets, and innovation drivers.
He announced that the Financial Services Agency (FSA) plans to engage in dialogue with the industry and called for active input from businesses and users to shape a comprehensive and forward-thinking tax system.
The conference underscored the urgency of addressing cryptocurrency taxation to foster a supportive environment for innovation while ensuring clarity and fairness in tax treatment.
August 2024, Cryptoniteuae