Japanese taxing agencies have reported that local cryptocurrency traders, both individuals and companies have avoided taxes as high as $93 million over the course of several years, up until March 2019.
The reasons for not disclosing the trading information by crypto traders is the outrageous taxes imposed by the government on crypto gains. Cryptocurrencies in Japan, although widely accepted in the economy, are considered as miscellaneous earning, which are officially taxed at 55%.
This is an outrageous number even by Scandinavian standards and could be the explanation of why investors refrain from disclosing such information.
The Japanese government is going to attempt a new system in order to combat crypto tax evasion in the future, where it will request local cryptocurrency exchanges to disclose information about their traders’ activities and revenue. The information will contain names as well as addresses.
Many crypto enthusiasts have called this a violation of what makes the blockchain itself, and the potential devaluation in the future. Anybody who has revenue from cryptocurrencies above $1,800 annually will be subject to the 55% tax.
There are entities in Japan that do not support the new law but are ready to accept it if the Financial Services Agency (FSA) reduces the tax from the outrageous 55% to a more moderate 20%. Should the taxes be reduced to this level, it is believed that more crypto traders and investors will be compliant in disclosing the information.
This would lead to recovering 100% of the taxable income and not scramble for new legislation in order to recover the evaded funds.
The system proposed by the government will launch in January 2020. But many are saying that it will be the end to local exchanges as most traders will flee to offshore companies.
It’s unknown what type of deal the government can strike with foreign exchanges, but it is likely that they have already considered this possibility.
