As Japan approaches its highly anticipated elections on October 27, 2024, the leader of the Democratic Party for the People (DPP), Yuichiro Tamaki, has introduced a bold proposal aimed at positioning Japan as a global leader in the Web3 space. Tamaki has pledged to lower the tax rate on cryptocurrency gains to 20%, a significant drop from the current progressive taxation rate of 15% to 55%.
This move, he argues, will not only make Japan more competitive on the global crypto stage but also enhance individual financial freedom, innovation, and adoption of Web3 technologies.
Tamaki’s Vision for Crypto Tax Reform
In a statement posted on X (formerly Twitter) on October 20, Tamaki directly addressed the taxation of cryptocurrency, stating, “If you think crypto assets should be taxed separately at 20% instead of treated as miscellaneous income, please vote for the Democratic Party for the People.”
Currently, Japan taxes crypto gains as miscellaneous income, meaning that individuals can be taxed at rates ranging from 15% to 55%, depending on their income level. For high-income earners, particularly those making more than 40 million Japanese yen (about $268,000), the tax burden is significant. In contrast, stock market profits in Japan are taxed at a flat 20%, and Tamaki believes cryptocurrency gains should be treated similarly.
Under his plan, not only would the tax rate on crypto be slashed to 20%, but Tamaki also seeks to eliminate taxable events when individuals exchange one cryptocurrency for another. This reform is aimed at fostering greater freedom and flexibility for crypto traders and investors, encouraging more activity in the sector without the fear of immediate taxation.
Also read: Indicted NYC Mayor Eric Adams’ Crypto Promises Under Scrutiny Amid Legal Troubles
A Bold Move to Position Japan as a Web3 Leader
Beyond tax reform, Tamaki’s policy goals align with his broader ambition of positioning Japan as a leader in the Web3 space, which encompasses decentralized technologies like blockchain, digital assets, and smart contracts. Responding to a query from an X user, he said that his party would consider imposing tax cuts on other financial income in the future, but for now, the focus is on Web3 innovation. He added, “We want to make Japan a strong nation in the Web3 business.”
Japan, with its well-established technology sector, is seen as a prime candidate to lead the world in Web3 adoption. However, the country’s high taxation on cryptocurrencies and stringent regulations have stifled some innovation in the past. Tamaki’s proposal seeks to address these issues by providing a more business- and investor-friendly environment for crypto-based businesses and individual investors alike.
Challenges Ahead for Tamaki and the DPP
While Tamaki’s vision for Japan’s crypto future has gained attention, his Democratic Party for the People (DPP) faces an uphill battle in turning these ideas into reality. The party currently holds only seven seats out of 465 in the House of Representatives. Despite this, there are signs that the DPP could increase its representation, potentially securing as many as 20 seats according to some opinion polls. However, the ruling Liberal Democratic Party (LDP) and its coalition partner Komeito are expected to retain a majority in the upcoming elections.
Tamaki’s proposal also comes amid ongoing discussions in Japan about overhauling the country’s tax code. In August 2024, Japan’s Financial Services Agency (FSA) announced plans to introduce a comprehensive overhaul of the nation’s tax system by 2025, including provisions aimed at reducing the tax burden on cryptocurrencies. While this marks a step in the right direction, the current corporate tax rate for crypto holders remains high at 30%, even if the company does not sell any of its holdings.
For individuals, the current tax regime places a heavy burden on those earning large incomes from crypto trading, which has been seen as a deterrent to wider adoption and trading in the country. Tamaki’s proposal is therefore timely and aligned with the broader goal of making Japan a more crypto-friendly nation.
Japan’s Crypto Tax Landscape: The Need for Change
Japan’s crypto tax policy has long been a point of contention within the industry. Crypto tax firm KoinX has noted that the current tax rate on crypto gains can be as high as 55%, making it one of the highest in the world. Many within the crypto community have pointed out that such high rates discourage both domestic and international investments in Japanese blockchain startups, pushing innovators to look elsewhere.
Tamaki’s proposal, which aligns crypto tax rates with those on stock market gains, aims to remedy this by creating parity and providing more incentives for crypto investors to operate within Japan’s borders. His plan is a significant step towards providing regulatory clarity and fostering a more business-friendly environment for the burgeoning digital economy.
