Currently, the Japanese who buy bitcoin have to pay an 8% consumption tax. A Japanese parliamentarian has proposed to abolish it to keep up with other leading economies, triggering a nationwide discussion.

Tsukasa Akimoto pointed out that the consumption tax on bitcoins runs counter to the international trend, says Nikkei. He was echoed by Yuzo Kano, the head of the Japan Authority of Digital Assets:

“Japan is going against the world. The taxation is bad for Japan in terms of its competitiveness.”

The consumption tax is levied every time a Japanese citizen buys bitcoins with yens through a Japanese exchange because this bitcoins fall under the definition of “imported goods”. However, bitcoins can be also bought on foreign exchanges and “smuggled” into Japan. The existing law is, therefore, detrimental not just to individuals but also to Japanese bitcoin dealers. According to Kano, “We need a level playing field that lets Japanese dealers compete fairly with outsiders.”

Proponents of the law abolition also point to the fact that Japan is the only G7 country to tax bitcoins. However, according to the Finance Minister Tarō Asō, “Japan is not alone” – Australia also taxes virtual currencies. He believes that consumption tax on bitcoins will not interfere with the coming fintech boom.

As we reported earlier, Japan’s Financial Services Agency is currently exploring the possibility to recognise digital currencies as “methods of payment equivalent to conventional currencies.” But even if virtual currencies are recognised a medium of exchange, it does not mean they by default become tax-free.

Last October, the European Court of Justice ruled that bitcoin exchange transactions must be exempt from VAT, equating digital currencies to fiat.

Alexey Tereshchenko