Japan is taking the Mt. Gox collapse seriously and is already looking into measures to address the digital currency conundrum – one of which is to levy taxes on bitcoin transactions.
According to the Yomiuri Shimbun newspaper, Japan’s ministry of finance and the national tax agency are studying “possible rules” that could govern digital currency transactions.
It appears that Japanese authorities think purchases made with digital currencies could be subject to existing consumption and corporate taxes.
Even though bitcoin is not recognized as an official currency according to the law, it can still be used to make purchases and this means it can be taxed, the newspaper said. But bitcoin’s anonymity made it difficult for Japan’s tax office to track and calculate what transactions were being made.
As AFP points out, the Yomiuri Shimbun does not cite any sources in its report. The newspaper does say, though, that Japan and many other countries simply lack the regulatory framework to levy taxes on bitcoin transactions.
Catching up
Japanese Finance Minister Taro Aso confirmed on Tuesday that the country is still trying to understand what led to the Mt. Gox collapse and whether criminal activity was involved.
According to Reuters, Aso told reporters that authorities still do not have a “clear grasp of the situation”. He added:
“(We) don’t know if it was a crime or just a bankruptcy.”
However, Aso stopped short of commenting on possible regulation or taxes.
Regulation inevitable?
Although Aso did not say anything that would confirm the Yomiuri Shimbun report, it should be noted that he has made some interesting statements in the past.
Following the Mt. Gox collapse, Aso said he had been “thinking it would collapse sometime”, adding that Japan is very advanced in the field of digital currencies.
“I was thinking that we might face a situation where Japan has to act, but I’d say it came earlier than I thought,” he said.
In essence, it seems as if Japan was going to act with or without the Mt. Gox collapse – the embarrassing failure and bankruptcy of the Tokyo-based exchange will simply shift things into a higher gear.
The big question is how Japan plans to go about it. As the Yomiuri Shimbun points out, authorities are looking into “consumption and corporate taxes,” which is puzzling in itself. If bitcoin is treated as a commodity, even simple transactions could be taxed, much like the sale or resale of everyday goods.
If bitcoin was treated as a currency, this would be a non-issue. However, as Japan does not consider bitcoin a currency, it needs to find an alternative way of taxing bitcoin transactions – that is the crux of the problem. Corporate taxes would not apply to consumers.
International effort needed
However, Japan cannot regulate bitcoin on its own. Just last week the country’s Senior Vice Finance Minister Jiro Aichi said international collaboration would be necessary if a viable regulatory framework was to be introduced.
Aichi suggested that international coordination is necessary to prevent criminals from exploiting loopholes. National regulators cannot do it on their own, because the framework has to be harmonized.
Aichi went on to stress that Japan does not consider bitcoin a currency, which is another problem legislators need to address in order to apply existing legislation to bitcoin transactions.
The Bank of Japan said it is keeping track of developments in the world of digital currencies, but so far it has not made any statements about their use.
Taxes image via Shutterstock