To tax or not to tax, that is the question that Japanese lawmakers are mulling over.
Recently, financial regulators in the country tabled a proposal that will see digital currencies like bitcoins treated as real money. Now, calls—particularly from members of the ruling party—are mounting in the Japanese Diet to exempt bitcoins from consumption tax.
Tsukasa Akimoto, a legislator from the Liberal Democratic Party, proposed during a budgetary committee hearing in the lower house last Feb. 5 that bitcoin purchased should be exempt from an 8 percent consumption tax, Nikkei reported.
According to the report, Akimoto asked Finance Minister Taro Aso: “Can’t you consider not imposing consumption tax on bitcoins in line with the international trend?”
The finance minister reportedly answered that “Japan is not alone” when it comes to taxing virtual currencies. Last year, however, the European Court of Justice (ECJ) declared that exchanges of bitcoins and other digital currencies are to be treated like traditional money such as bank notes and coins, and are thus exempted from value-added tax (VAT).
Japan is currently the only member of the Group of Seven industrialized nations that taxes bitcoins.
The debate comes as the Asian country is pushing ahead with its plan to regulate digital currency. Several weeks ago, the Japan Financial Services Agency (FSA) proposed for virtual currencies to be used not only for goods and services, but also as an alternative for legal tender through purchases and trades.
If the change pushes through, financial institutions that deal with cryptocurrencies will soon need to register with the FSA, which hopes to prevent another Mt. Gox collapse from happening.
However, taxing bitcoins will affect both dealers and consumers. Critics believed the 8 percent consumption tax rate will sap people’s eagerness to use digital currency. Yuzo Kano, head of industry group Japan Authority of Digital Assets told Nikkei: “Taxation is bad for Japan in terms of its competitiveness.”