Korean Finance Minister vows to fight measures to delay crypto tax code

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South Korea’s Strategy and Finance Minister Hong Nam-ki has vowed that the controversial cryptocurrency tax code will come into effect on January 1, 2022, despite measures taken this week by the majority Democratic Party to address it. postpone to 2023.

The tax code will levy a 20% tax on income generated from crypto transactions exceeding 2.5 million Korean won, or approximately $ 2,100.

International media reported this week that the Democratic Party, which holds a slim majority in South Korea’s National Assembly, intends to pass a bill postponing the crypto-tax law by end of October. But the party faces an uphill battle to pass the bill in the face of opposition from Hong, as it holds only a slim majority.

Hong holds considerable political power, having been a former Prime Minister of South Korea, and he was appointed Minister of Finance by current President Moon Jae-in.

This is at least the second time the minister, who is a member of the People’s Power Minority Party (PPP) in the country’s government, has told the majority Democratic Party that the tax will go into effect as planned despite their opposition.

Kim Byung-ook, a representative of the Democratic Party in the National Assembly, asked the minister at a session of the National Assembly on Wednesday whether the tax could be postponed to 2023 to coincide with the capital gains tax On stocks. Kim said:

Isn’t it reasonable to levy the capital gains tax and the tax on virtual assets in 2023?

Minister Hong’s response was a categorical no. He further said that the tax law had already been drafted and completed last year. His response mirrored that of April 2021 when Hong made it clear that crypto taxes were inevitable.

In the past, it was almost impossible to collect taxes on virtual asset accounts, so no taxation was done. […] The foundations are now laid, and on that basis we will be taxed from next year, he said on Wednesday.

Democratic Party Amendment

Democratic Party Representative Noh Woong-rae made it clear on Thursday that the ruling party could pass the postponement bill if it managed to muster the votes.

But they face an uphill battle against one of the country’s most seasoned and respected politicians at a time when the majority of Democratic parties have grown precariously narrow. The Democratic Party lost 18 of its 180 seats in the National Assembly in local elections in June, showing that they have fallen out of favor. There may also be disagreements between the party and Hong as the Democratic Party once called for Minister Hongs to be impeached.

The Democratic Party opposes the bill on a number of grounds and argues that the infrastructure in place is inadequate for the government to calculate and collect crypto taxes. As of now, the National Tax Service (NTS) plans to rely on crypto exchanges to report user transaction data for the purpose of calculating taxes.

To ensure exchanges can safely collect this data, the government required them to obtain Information Security Management System certification and partnering with a local bank for real-name bank accounts for each user. individual. These requirements, stipulated by the amendment to the Special Reports Act, will result in the closure of more than 40 crypto exchanges across the country by September 24.

The NTS does not have the capacity to collect data from private wallet transactions for tax purposes. In the absence of such infrastructure, the Democratic Party believes that tax evasion could increase.

Related: Survey Shows South Koreans Support Cryptocurrency Tax Law

Representative Noh shared his commitment to work across party lines with his fellow Representatives to secure the votes needed to pass a postponement bill by the end of the public session in October.

Long story

This is far from the first time that the crypto-tax law has been threatened with postponement. Shortly after the tax bill was passed about a year ago, the Korea Blockchain Association was among the first group to request a delay. The KBA stressed that institutions, including crypto exchanges, would need a longer grace period to prepare for the new taxes.

Opposition to the tax has grown throughout the first half of 2021 from several sources, not the least of which is the Democratic Party. In May, Koh Young-Jin, secretary of the National Assembly, discussed in open session the benefits of deferring the tax.

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