SEOUL: South Korea will look to tighten a crackdown on tax evasion by cryptocurrency investors and high-income earners as it seeks fresh revenue to cover rising welfare costs, its finance ministry said yesterday.
The government proposes revising tax codes so that tax authorities will be able to seize crypto assets held by tax dodgers even if their cryptocurrencies are stored in digital wallets, starting next year.
Current regulations make it difficult for authorities to confiscate virtual assets held in digital wallets, although those accessible through exchanges can be seized to pay overdue taxes.
Going after tax evaders is part of South Korea’s broader probe to tighten oversight of crypto markets to root out money laundering and other financial crimes using cryptocurrencies, as President Moon Jae-in looks to expand the tax base to fund increased welfare spending.
The government has been hiking taxes from big earners and conglomerates to ensure wealthy citizens share the burden of growing costs of an ageing population, as South Korea became the world’s fastest-ageing society with the lowest birth rate anywhere in 2020.Yesterday’s proposal is one pillar of the government’s once-a-year review of its tax system, which seeks to revise a total of 16 tax codes.
The revisions will lead to a decline in tax revenue of at least 1.5 trillion won (US$1.30bil or RM5.5bil) between now and 2026, as tax breaks for research and development in semiconductors, batteries and vaccine sectors more than offset any additional revenue expected from high-income earners, according to the ministry.
“Although that 1.5 trillion can’t be described as tax neutral, it isn’t that big of an amount and something necessary as we revised tax codes,” finance minister Hong Nam-ki said at a news conference.
The government also proposed expanding tax incentives to companies for hiring especially outside the capital Seoul, and offered to cut corporate income taxes for companies reshoring production capacities. The ministry will submit the tax review to parliament by Sept 3 as the proposal needs approval from lawmakers to make it enforceable, the statement said.
It had been reported earlier in the year that certain lawmakers felt that the crypto industry was unique and different from traditional finance, and thus required a separate regulatory framework. The government’s current method of regulating the cryptocurrency industry is by applying anti-money laundering laws and know-your-customer protocols to crypto exchanges.
“We need virtual asset legislation that will allow Korea’s blockchain industry to prosper while protecting traders from fraud,” lawmaker Kim Byung-wook had said. “Otherwise we will fall behind.” ― Reuters