A news report by local news agency, Asahi, warned cryptocurrency traders in Japan to pay tax, amid the growing number of individuals and businesses refusing to report profits realized from crypto transactions.
Information gathered by Tax authorities showed that about 30 companies and 50 individuals failed to report their income from crypto which sums to at least 10 billion yen ($93 million). A significant portion of those gains came in the middle of the crypto market bull run back in December 2017.
The report further notes that a primary reason behind Japanese residents refusing to report their crypto taxes has to do with the higher rates charged on such earnings.
Since the profits realized from crypto-related transactions are regarded as miscellaneous income, investors have to pay up to 55% of the total revenue realized, even though stock income earners pay just 20%.
Japan Tax Authorities To Tackle Under-Reporting of Crypto Taxes
To resolve the issue of under-reporting, Japanese tax authorities as per the report plan to introduce a new model for tracking more significant cryptocurrency transaction. To this respect, the authorities acknowledged it would be impossible to track individuals who transact on cryptos with high anonymity such as Monero (XMR) and ZCash (ZEC), including those who trade on foreign exchanges.
To solve the problem, Japan’s National Tax Agency (NTA) plans to roll out a new system from January, on the bid to increase transparency in crypto transactions.
The system will ask private-sector exchange operators to detail the names of the users that will conduct transactions exceeding a certain amount. Also, exchange operators will face specific stipulated penalties if they fail to provide such information.
Meanwhile, the latest efforts to minimize under-reporting of crypto taxes comes amid growing Japanese interest in cryptocurrencies.
The report cites an analysis from Japan Virtual Currency Exchange Association (JVCEA) as confirming that the transactions of five popular cryptocurrencies at member exchanges amounted to 69.147 trillion yen, a 20-fold and 788-fold increase in fiscal 2016 and 2015 respectively when compared to fiscal 2017.