(Bloomberg) -- Crypto lobbying groups in Japan plan to ask the government to ease corporate tax rules that’s seen to be stunting the local digital asset industry’s growth.
Two of the top bodies -- the Japan Cryptoasset Business Association and the Japan Virtual and Crypto assets Exchange Association -- are preparing to submit a proposal to the Financial Services Agency asking it to make it cheaper for companies to issue and hold crypto tokens, according to an internal memo seen by Bloomberg.
The groups will ask the government to stop taxing paper gains on crypto holdings if firms own them for purposes other than short-term trades, according to the memo. Currently, profit from cryptocurrency holdings, including unrealized gains, is subject to corporate tax of about 30%.
This can make it expensive for companies to hold onto digital coins once they’re issued, raising the bar for launching crypto projects. The levy also applies to so-called governance tokens, which allow holders to participate in business decisions by offering them voting powers.
The calls from the crypto industry will be a test for how committed Prime Minister Fumio Kishida’s government is to developing Japan’s so-called Web3 business as part of an initiative announced last month. High taxes, which are particularly burdensome for many cash-strapped startups, have already made some Japanese firms relocate to countries such as Singapore.
A spokesman for JCBA said the two organizations plan to submit the proposal to the FSA agency as early as this week, though declined to comment on the contents of the request. JVCEA declined comment.
The FSA has been discussing the need of a corporate tax change with the crypto industry, said an official who declined to be named because of the agency’s policy. The regulator hasn’t determined whether to include this proposal in its annual revision suggestions to be submitted in August to the tax authorities, though isn’t ruling it out, the official said.
Push for Change
“Japan is an impossible place to do business,” said Sota Watanabe, chief executive officer of Web3 infrastructure developer Stake Technologies Pte., who moved his company to Singapore partly because of higher taxes. “The global battle for a Web 3.0 hegemony is under way, and yet, Japan isn’t even at the start line.”
The lobby groups also plan to ask authorities to set a uniform 20% income tax on individual investors’ earnings from cryptocurrencies, instead of them being subject to rates that can reach as high as 55%, according to the memo.
Some politicians have already raised this need for digital technology to drive growth in the Asian nation. Masaaki Taira, an outspoken crypto supporter in the ruling Liberal Democratic Party, has been pushing fellow lawmakers and the finance ministry for changes to stem the outflow of digital talent.
Japan’s annual tax discussions usually begin in the summer after representative bodies of industries submit proposals to government offices in charge. The Liberal Democratic Party’s powerful tax panel makes decisions near the end of the year.
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