The People Power Party (PPP) in South Korea made a strategic decision ahead of the upcoming general elections to push for a further two-year delay in the implementation of crypto taxation. This move was announced as a key campaign promise during a press conference held on Feb. 19. The proposal to delay the commencement of taxation until January 2025 is seen as a way for the ruling party to gain support by addressing a hot-button issue that affects a growing number of voters.
The decision to delay crypto taxation aligns with the government and legislative consensus to prioritize regulatory groundwork before enforcing taxation on virtual assets. The justification given by PPP is that a foundational regulatory “system” must first be in place for crypto before taxation can be feasible. The lack of a comprehensive regulated trading platform and challenges in income verification with crypto companies were cited as significant obstacles in effectively collecting taxes on virtual assets.
PPP also plans to propose the second phase of the “Cryptocurrency User Protection Law” during the upcoming 22nd National Assembly session. This legislation aims to address gaps identified in the first phase of the law, which was passed in June 2023. The proposed legislation will focus on defining custodial service providers, legally incorporating listing systems, and establishing a crypto exchange to ensure comprehensive regulation and oversight within the virtual asset market.
While PPP maintains that completely abolishing crypto taxation is not under consideration, the party is exploring adjustments to the taxation criteria. This is in response to criticisms of tax disparity between stocks and virtual assets. The proposal aims to harmonize the tax treatment of various asset growth strategies and address challenges in tracking investment amounts and returns for taxation purposes. Under the current law, income from the transfer or lending of virtual assets exceeding KRW 2.5 million is subject to a 22% tax, including local taxes, contrasting with the KRW 50 million non-taxable limit for stocks.
The delay in crypto taxation is seen as a necessary step to ensure that there is a comprehensive system in place to tackle the complexities of taxing virtual assets. The lack of a regulatory framework and challenges in income verification continue to pose significant obstacles to effective tax collection. Establishing a solid taxation foundation is deemed crucial by PPP, but it requires more time and effort to develop the necessary infrastructure to support crypto taxation.
The decision by South Korea’s ruling party to push for a further delay in the implementation of crypto taxation reflects a strategic move to address regulatory challenges and gain support ahead of the general elections. By prioritizing regulatory groundwork and proposing legislative changes, PPP aims to create a comprehensive system that can effectively tax virtual assets while addressing criticisms of tax disparity. The upcoming months will be crucial in finalizing these changes and formalizing the party’s stance on crypto taxation as part of their election campaign strategy.
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