A committee of tax experts in Japan that is responsible for advising the government on taxation matters has called for the simplification of the country’s cryptocurrency tax filing process.
According to officials of the tax panel, the process is currently complicated and a change is required in order to enhance accuracy and compliance. Per a Japanese news publication, Sankei, the committee held a meeting earlier in the week where the proposal to change the current cryptocurrency tax filing system was discussed.
Part of the problem according to the committee lies in the fact that calculating cryptocurrency gains for taxation purposes is a complex affair and this discourages some owners of digital assets from declaring their crypto holdings when filing tax returns.
According to the tax panel, cryptocurrencies in the Asian country are taxed not only on the gains made but also on the gains accruing when one digital asset is converted into another. Other complications stem from the fact that a unified source of historical data on prices is lacking. Towards finding a solution the panel has indicated that it will hold meetings where it will seek views and opinions from various stakeholders.
As previously reported by CCN.com cryptocurrency investors in Japan face crypto tax rates ranging between 15% and 55% and this is classified under miscellaneous income. The amount paid as tax depends on earnings with the higher rate imposed on the high-earners. For instance, investors who generate yearly earnings of more than 40 million yen (approximately US$365,000) pay a 55% rate on their cryptocurrency income.
The view by the tax panel that simplifying the cryptocurrency tax filing process will enhance compliance is correct as it has been previously noted that a significant number of crypto investors in Japan could be evading taxes. A report released earlier this year, for instance, indicated that out of the 549 individuals who recorded a non-working or non-operational profit (income generated from investments) of US$1 million in 2017, about 331 were investors in the crypto space.
This was however met with incredulity with some observers saying that many more evaded paying taxes on their crypto investments especially given the fact that Japan is not only the world’s third-largest economy but the level of cryptocurrency use, awareness and adoption is among the highest in the globe.
“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,” one analyst observed as CCN.com reported at the time.
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Last modified: March 4, 2021 3:50 PM