Even if the Democratic Party, which is in power, intends to put off enacting new crypto tax legislation, the Finance Minister has other ideas
Minister of Strategy and Finance Hong Nam-Ki has promised that the contentious crypto tax legislation would go into force on January 1st, 2022 despite attempts this week by the Democratic Party to delay it until 2023.
If you earn more than 2.5 million KRW ($2100 USD) in cryptocurrency trades, the tax code will impose a 20% tax.
It was reported this week in international media that the Democratic Party, which has a narrow majority in South Korea’s National Assembly, plans to approve a measure delaying South Korea’s crypto tax law until the end of October. However, given Hong’s resistance, the party will have a difficult time getting the law through with its current slender majority.
Former South Korean Prime Minister Hong Il-Sung now serves as Finance Minister under President Jae-In Moon, who nominated him. His experience has allowed him significant political capital.
This is at least the second time the minister, who is a member of the country’s minority People’s Power Party (PPP), has informed the majority Democratic Party that the tax will go into force as planned despite their objections.
During a National Assembly session on Wednesday, Democratic Party Representative Kim Byung-Ook asked the Minister if the tax might be postponed until 2023 in order to correspond with the capital gains tax on stock transactions.
Kim said: “Isn’t it reasonable to levy the stock market capital gains tax and virtual asset tax in 2023?”
Minister Hong’s reply was an emphatic ‘No.’ He went on to say that a version of the tax code had already been finished the previous year. Similarly, in April 2021, Hong stated that crypto taxes will be unavoidable.
“In the past, it was almost impossible to collect taxes on virtual asset accounts, so no taxation was carried out […] The foundation has now been laid, and based on that, we will be taxed starting next year,” he said on Wednesday.
Why the opposition?
Representative Noh Woong-rae, a Democrat, said on Thursday that the ruling party may approve the delay law if they can garner enough votes.
In a time when the Democratic Party’s majority is perilously small, they face an uphill struggle against one of the most experienced and well-regarded lawmakers in the country. In June’s municipal elections, the Democratic Party lost 18 of their 180 members in the National Assembly, demonstrating its waning popularity. There may be resentment between the Democratic party and Minister Hong due to a previous request by the Democratic party for his ouster.
The Democratic Party opposes the measure for a variety of reasons, including the fact that the government lacks the necessary infrastructure to assess and collect crypto taxes. For the time being, the National Tax Service (NTS) intends to depend on crypto exchanges to disclose customers’ transaction data for tax purposes.
Accordingly, the government has mandated that exchanges get Information Security Management System (ISMS) accreditation and a relationship with a local bank for individual user real-name bank accounts in order to ensure that they may safely gather this information. More than 40 crypto exchanges throughout the nation will close by September 24 as a result of the amendments mandated by the Special Reporting Act.
The National Tax System (NTS) is unable to collect data from private wallet transactions for tax purposes. The Democratic Party fears that tax evasion would worsen if there is no such infrastructure in place.
Representative Noh pledged to cooperate with colleagues of all parties to approve a postponement bill by the end of open session in October.
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