Crypto Tax Violations: Japanese Tax Agency open up investigations on firms

• The Japanese National Tax Agency (NTA) is currently investigating hundreds of crypto tax violations.
• The agency launched 615 investigations into Japanese residents’ crypto holdings in the financial year 2022.
• In FY2021, the NTA launched 444 crypto-related investigations, uncovering 405 violations.

The Japanese National Tax Agency (NTA) has unearthed several crypto tax violations over the past year. The agency feels that the number of tax violations in Japan has been on the rise over the past year. The data in the report, and also reported by Japan’s CoinPost, shows that the agency launched 615 investigations into Japanese residents’ crypto holdings in the financial year 2022.

So far, the NTA has unearthed 548 tax violation cases, marking a significant rise from the previous financial year. In FY2021, the NTA launched 444 crypto-related investigations, uncovering 405 violations.

However, there appears to have been a drop in the value of crypto tax violations, possibly reflecting a fall in global crypto prices. NTA, however, was quick to point out that the average value of undeclared income in crypto-related cases was around $206,000 per case in FY2022, down from $245,000 in FY2021. The cumulative value of the undeclared income for FY2022 was $126.5 million, up from over $110 million.

What’s the reason for the Crypto Tax Violations Rise?

One of the reasons accredited to the recent rise in crypto tax violations may be due to an increase in NTA investigations in FY2022. Experts feel that the number of investigations has exponentially grown compared to the previous year. As a result, the number of crypto tax violations has increased.

It is believed that the number of investigations has increased by 1.4 times compared to the previous year. Experts feel that the number is higher this year largely due to lag during the COVID-19 pandemic, which forced many to stay home. As a result, NTA could only focus on higher-income individuals.

The Japanese crypto community has repeatedly asked the government to reform the tax system. Crypto income in Japan comes under the “other income” head, whereas cryptocurrency profits are taxed as capital gains in other countries.

Are crypto taxes too high in Japan?

Many industry leaders in Japan have been trying to convince the government that the taxes levied on the crypto gains are too high for their liking. They believe the only way to ensure that the crypto tax violations are kept in check would be to ensure that the tax levied is moderate and reasonable in nature.  

Corporations and political leaders claim the system discourages firms from holding coins by taxing unrealized income. Tokyo has effectively agreed to reform the law for firms but has thus far refused to consider changing how it taxes individuals.