The Japanese National Tax Agency (NTA) has disclosed its recent focus on numerous crypto tax violations. In their annual report on tax investigations, the agency highlighted 615 inquiries into Japanese residents’ crypto holdings for the financial year 2022, revealing violations in 548 cases—an escalation from the prior fiscal year.
Interestingly, despite the surge in cases, there’s a perceptible decline in the value of crypto-related tax violations, seemingly correlated with the global dip in crypto prices. The NTA reports that the average undeclared income in crypto cases dropped to around $206,000 per case in FY2022, down from $245,000 in FY2021. Nevertheless, the cumulative value of undeclared income for FY2022 increased to $126.5 million, up from over $110 million.
A Japanese crypto analyst, Jeanscpa, attributes the rise in violations to the NTA’s intensified investigations in FY2022, noting a 1.4 times increase compared to the previous year. According to Jeanscpa, the irregularities were accentuated by the coronavirus pandemic, during which the NTA shifted its focus towards higher-income individuals, slowing down the pace of probes.
The crypto community in Japan has persistently urged tax system reforms, deeming the current structure unfair. In Japan, crypto is taxed as “other income,” contrasting with other nations where coin-related profits are subject to capital gains levies. Critics, including politicians and business leaders, argue that the existing tax regime is a deterrent for firms to hold coins due to taxing unrealized income. Despite these concerns, Tokyo has been reluctant to alter the taxation approach for individuals.