Yuichiro Tamaki, the leader of Japan’s Democratic Party for the People (DPP), has outlined a significant proposal to amend cryptocurrency taxation, promising to reduce the tax on crypto gains to 20% if elected. This announcement was made on October 20 via an X post, where Tamaki urged voters to support his party if they favor more lenient taxation on crypto assets.
Tamaki’s tax reform plan includes a pivotal change where crypto gains would be taxed at a flat rate of 20%, similar to the current tax rate on stock market profits in Japan. Furthermore, his proposal suggests that no tax events would be triggered when one cryptocurrency is exchanged for another, aiming to simplify the tax obligations for crypto traders and investors.
Current Political and Legislative Context
The likelihood of Tamaki’s plan coming to fruition faces significant challenges, as the DPP currently holds only seven seats in Japan’s 465-member House of Representatives. Despite these odds, Tamaki is actively promoting his policy in the lead-up to the national elections scheduled for October 27. The DPP’s campaign is primarily focused on economic measures, such as increasing take-home pay to combat inflation, with the crypto tax reform positioned as a key strategy to foster Japan’s leadership in the Web3 sector.
Comparison with Existing Tax Laws
Currently, cryptocurrency profits in Japan are taxed as miscellaneous income, with rates ranging from 15% to 55% based on the individual’s income level. The highest bracket affects individuals earning over 40 million Japanese yen ($268,000), where they are subjected to a 55% tax rate. In contrast, stock trading profits are capped at a 20% tax rate. Additionally, corporate holders of crypto assets are required to pay a flat 30% tax on their holdings at the end of the financial year, regardless of realized profits.
On August 30, Japan’s Financial Services Agency announced intentions to overhaul the country’s tax code for the fiscal year 2025. These changes include provisions to lower taxes on crypto assets, indicating a broader shift towards more favorable conditions for cryptocurrency users and investors within the nation.
Despite the ambitious proposals from the DPP, public opinion surveys and political analysts suggest that the likelihood of Tamaki’s party gaining significant power in the upcoming elections is low. The ruling Liberal Democratic Party, along with its coalition partner Komeito, is expected to maintain a majority. However, projections indicate that the DPP might increase its representation from seven to potentially 20 seats.
As the Japanese election approaches, the proposal to lower crypto taxation rates highlights the growing recognition of cryptocurrency’s impact on national economies and the global financial system. While the DPP’s chances of implementing such reforms remain uncertain, the discussion itself marks a significant step toward integrating digital assets into formal economic strategies. This move by Tamaki and the DPP could set a precedent for other nations considering similar adjustments to their crypto tax policies.
Featured image credit: DALL-E by ChatGPT
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