A proposed plan to end sales-tax collection on purchases of virtual currencies in Japan will likely propel the growth of Bitcoin and other digital currencies as alternatives to fiat according to a report by Nikkei.
After the news, more exchange traders were reported joining the Bitcoin’s bandwagon. The market research firm, Seed Planning, estimating the Bitcoin's annual trading volume will soar to 2 trln yen this year.
This move could slash costs for buyers and will be another incentive that would motivate existing Bitcoin users in the country that has been described as one of the first to officially recognize digital currencies as money. It could also increase adoption by new users and impact on the price of the top cryptocurrency.
On March 4, 2016, the cabinet in Japan had approved a series of bills which would help the banking sector expand their reach when it comes to information technology businesses.
That was a first step on the way for Bitcoin and other virtual currencies to play a role in Japan’s financial system. This way these currencies can be better regulated and managed within the country.
The only G7 country that taxes Bitcoin purchase
CEO of BitFlyer, Yuzo Kano, was quoted as saying that the trading volume has been growing at a pace that has not been seen before since this spring.
The latest move to end sales-tax is derived from the same legislation that was passed in May that classified virtual currencies as a means of payment - a kind of prepaid payment instrument. Once the law on fund settlements as revised in May, it will come into effect by June next year, it will end the 8% consumption tax that buyers in Japan pay to obtain Bitcoins at dedicated exchanges, along with other fees.
According to the Financial Services Agency, European countries and the United States have already eliminated tax on Bitcoin.
Aside that, the change would reduce costs for buyers and relieve operators of virtual-currency exchanges of the administrative burden related to the tax, administrative work will also be reduced, according to an official of a major Bitcoin exchange operator:
“Japan is the only country among the Group of Seven leading industrial economies that taxes Bitcoin purchases. As of September, about 2,500 stores across Japan accepted Bitcoin as a means of payment for shopping and dining,” said ResuPress, a Tokyo-based Bitcoin exchange operator which plans to let users pay electricity bills with the top digital currency soon.