In a recent move, the Japan Blockchain Association (JBA), a non-government advocacy group, called for a revision of the national tax regime for digital assets—a demand meant to ease the fiscal load on cryptocurrency holders. While this move reflects the innovations in the crypto sphere and their impending influence on economic systems, it also brings to the fore the complexities of regulating an ever-evolving, borderless digital economy.
Looking closely, the JBA brought attention to three significant issues that the current tax regime presents. Firstly, it seeks to eliminate year-end unrealized gains taxation on corporations holding crypto assets. Now, unrealized gains refer to profits reflected on paper but have not translated into actual transactions. By removing taxes on these gains, the JBA raises the question: Should unrealized profits—a theoretical value rather than actual income—be taxed?
Moreover, this inquiring stance is extended to another aspect of the crypto industry—the taxation method for personal crypto asset trading profits. The JBA suggests a shift from comprehensive taxation to self-assessment separate taxation, complemented by a uniform tax rate of 20%. Additionally, they propose allowing deductions for losses from depreciation of digital assets for up to three years. Is this a viable approach considering the volatile nature of the crypto market?
Lastly, JBA seeks the elimination of income tax on the profits generated from individual exchanges of crypto assets—a move that reflects the belief that in the growing web3 economy, transactions involving crypto-assets are likely to become the norm. Basing taxation on each transaction could undoubtedly become cumbersome and ultimately hamper the growth of the digital economy.
Yet, one can’t overlook the fact that while these changes are designed to foster growth, they also raise some alarm bells for regulatory bodies, especially when it comes to ensuring compliance.
The predicament of crypto-regulation is further highlighted by the recent reassurance of Japan’s Prime Minister Fumio Kishida to the commitment of nurturing the web3 industry, coupled with anticipation around Binance’s announcement of launching services on a new Japanese platform in 2023. It makes us ponder on whether governments should be lowering barriers for entry and find other means of regulation, or uphold a strict compliance policy to prevent abuse?
In conclusion, while the beckoning wave of the web3 era nudges us toward change, we must remember that revising taxation policies for crypto-assets is a task that requires striking a balance—balancing growth facilitation with ensuring sustainable economic practices. Unquestionably, our journey towards a blockchain future invites us to grapple with these complexities.
Source: Cointelegraph
