Japan plans to overhaul the tax system to boost economic recovery and digital innovation.
Flat Tax Proposal for Cryptocurrency Gains
Japan’s government is set to approve a significant economic stimulus package that includes sweeping tax reforms, among them a flat 20% tax rate on cryptocurrency gains. This contrasts with the current variable “miscellaneous income” tax, which can reach as high as 55% for digital asset transactions. The reform is expected to encourage greater participation in the digital asset space.
“The ruling Liberal Democratic Party is stuck between a rock and a hard place over whether to raise the threshold for tax exemptions from the current ¥1.03 million ($6,740) — which, if implemented, could rally much-needed support from the opposition Democratic Party for the…
Broader Tax Reforms to Boost the Economy
Additional tax measures under discussion include raising the tax-free income threshold from $6,650 to $11,345, cutting fuel taxes and slashing sales taxes to stimulate the economy until employment recovers, and bipartisan discussions that aim to finalize these reforms by the end of 2024.
A Growing Digital Asset Market
Japan has made strides in maturing its digital asset sector. Recent political developments, such as Prime Minister Shigeru Ishiba’s leadership, have strengthened bipartisan efforts toward tax reform. This aligns with the government’s goal of positioning Japan as a leader in Web3 innovation.
Political Context
The reforms come after the Liberal Democratic Party lost 68 seats in a recent referendum, signaling voter demand for economic recovery and a simplified tax structure. This political shift has likely influenced the push for reforms, particularly the focus on cryptocurrency taxation.
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