Gutting Satoshi — How Bitcoin can be taxed at 110% in Japan

Bitcoin in Japan can sometimes be taxed at more than its own value, leaving heirs and sellers of crypto worse off than they started. A new report from Nikkei details how BTC can sometimes be taxed at as much as 110%, as industry leaders and crypto advocates on the archipelago scramble desperately to get the government’s greasy fingers out of Satoshi’s wallet. 

According to Microstrategy’s Michael Saylor, it’s only “paranoid crypto-anarchists” who are worried about keeping bitcoin and government separate, or being able to use crypto non-custodially and permissionlessly. But for the Japanese, holding bitcoin and other crypto assets has now become a huge liability — thanks solely to the state.

If we consult the creator of bitcoin themselves, Satoshi Nakamoto, we see that the whole project was always meant to be electronic cash that doesn’t require a financial institution or third party; this is something now coming to bitter remembrance for those Japanese who had wished for the state to get more involved.

How Bitcoin can be taxed at over 100% in Japan

Of course there is debate about taxation in pretty much every country. And when it comes down to brass tacks, there is no getting around that it is money taken (usually without one’s express consent) under threat of force, and then spent on whatever the strangers in political office far away want to spend it on. Like it or not, it’s theft. Still, to avoid being caged, most people understandably pay the extortion fees out of self-preservation.

But in Japan, things are getting out of control for even the most happily obedient normie.

While the leader of the Democratic Party for the People (DPP), Yuichiro Tamaki, has been fighting alongside industry groups to get a separate 20% tax for crypto in place, the country’s new prime minister seems uninterested. PM Shigeru Ishiba recently went so far as to publicly doubt the legitimacy of bitcoin as an asset and to imply that tax reform would be promoting a scam to the public. So the possibility of being taxed at up to 55% on gains in Japan remains in place. But the nightmare doesn’t end there. Enter: the inheritance tax.

A new report from Japanese financial media outlet Nikkei details how in some cases, people might be taxed for even more bitcoin value than they got in the first place. The December 18 piece describes how the inheritance tax, combined with other taxes, could result in someone being taxed at 110%. Here’s the hypothetical breakdown:

• Someone buys 100 BTC in December 2014 (worth 4.6 million JPY).
• They die in December 2024, leaving the BTC (now valued at 1.437 billion JPY) to their child.
• The child must pay an inheritance tax maxed out at 55%.
• The heir then sells the BTC upon inheriting it, and must pay taxes on gains, with the acquisition price still being the original 4.6 million yen.
• Combine the two 55% taxes and others (inheritance tax, income tax, and local resident tax) and the child is now taxed at a rate higher than the value of the asset itself, or 110%.

The article goes on to note that even in cases where less value is involved, rates can still reach 100%, and details that even small gains in crypto can end up being taxed at rates higher than those of stocks.

“Even if the profit from selling virtual currency is small, there are many cases where the tax rate is higher than stocks,” the article by Tomoko Ōga states. “If the income amount subject to comprehensive taxation is 3.3 million yen or more but less than 6.95 million yen, the maximum income tax rate is 20% and the local resident tax is 10%, which is higher than the total of 20% for separate declaration taxation.”

Perhaps there was something to that permissionless exchange thing after all, but each day the state gets more involved, the very real stakes and threats of punishment are jacked up higher and higher. Thankfully, this results in even more innovation and development of efficient P2P (peer-to-peer) protocols so peaceful people can use their money freely and efficiently, without having to be extorted of their inheritance or pay for war. But then again, maybe they are just being paranoid.

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