SEOUL (THE KOREA HERALD / ASIA NEWS NETWORK) – South Korea has moved to push back the planned taxation of virtual assets despite strong opposition from financial authorities, raising questions about whether the country is properly managing the nascent category of digital investments.
The Strategy and Finance Committee of the National Assembly adopted on Tuesday, November 30 a bill of revision which would delay by one year until 2023 the taxation of capital gains from crypto-currency trading .
The delay is expected to be confirmed at a plenary session of the National Assembly scheduled for Thursday. As part of the revised plan, the government will impose a 20% tax on capital gains of more than 2.5 million won (S $ 2,900) from cryptocurrency transactions from January 2023.
Local cryptocurrency investors might be relieved to learn of the tax deferral, but there are a host of issues that remain unresolved and potentially explosive.
One of those issues is that the decision to push back tax on virtual assets is widely seen as a political move to win the hearts of young voters investing in cryptocurrency exchanges in the next presidential election – rather than a choice based on prudent political considerations.
Lee Jae-myung, the presidential candidate of the ruling Democratic Party, previously expressed his position in favor of postponing the taxation of virtual assets in a meeting with young people, citing the lack of preparation and the need to offer more investment opportunities to the younger generation. .
Critics of “populism” are already surfacing in media and online communities that ruling and opposition parties have agreed on revised tax structure because they want more votes 20-30 year olds during the presidential election scheduled for March 9. year.
The rare deal between the two sides, who are usually engaged in bitter political wrangling, came after the finance ministry reiterated its view that the tax regime should be implemented from January 2022 as planned. and preparations have already been made to collect taxes on the cryptocurrency. investors.
The dispute over the taxation of digital assets, especially over the status of cryptocurrency in terms of financial instruments, has grown alongside the rapid growth of blockchain-based startups and exchanges.
But the opposing positions of lawmakers and financial authorities on the taxation of cryptocurrencies are sending a confusing signal to investors. Some might take the delay as a chance to strike big as the gains from investing in cryptocurrency trading are temporarily “tax-exempt” in 2022.
After witnessing the impact of political calculations, cryptocurrency investors may put more pressure on politicians to increase the tax-exempt abatement by the planned 2.5 million won.
They claim the tax-exempt abatement is unfair given that investors in stocks and bonds have to pay taxes on earnings over 50 million won from 2023.
Another issue is the controversy surrounding the definitions of cryptocurrency and virtual assets. The government is conservative of the view that cryptocurrencies are “intangible assets”, denying them the full status of real assets. Strangely, he is eager to collect taxes on trading cryptocurrencies.