New Report Suggests About 8,000 Korean Residents May Lose Digital Assets Over Tax Evasion
Financial regulators in the South Korean city of Cheongju are set to confiscate digital assets from local tax evaders.
According to a report on Aug 22 by Yongap, a local news agency, the authorities of the city have set plans in motion to clamp down on virtual asset holders in centralized exchanges who have not filed taxes.
The city has opened an inquiry into seven crypto exchanges requesting the filing of certain information including the portfolio of 8,520 users who owe the government at least 1 million won ($750).
Centralized exchanges like Upbit and Bithumb were mentioned in the report as the city explains the need to inquire about the holdings of residents and generate income for the government.
In the past few years, local administrations have bemoaned the use of digital assets to conceal property and evade taxes. The trend of authorities has been to partner with centralized exchanges to get the holdings of traders and investors although some users devise other means like privacy coins and decentralized exchanges.
Specifically in South Korea, authorities have stressed the necessity to clamp down on tax avoidance stating the citizens would be held accountable.
Last year, Cheongju authorities requested the details of 16,000 digital asset investors as they pursue claims of tax evasion. The city flagged 17 persons and collected up to 68 million won, about $51,000.
Governments and citizens get smarter
Both authorities and citizens may be deploying new methods to outpace the other in terms of taxes. Several tax authorities have criticized “unpatriotic” moves by digital asset investors to hide under the guise of cryptocurrency investment to avoid paying taxes.
Many governments including recent regulations in Nigeria and Australia have widened the tax net to include virtual assets and expressly stated tax requirements from digital asset investors.
Countries have also deployed the tactic of viewing digital assets as personal properties to make them taxable assets which has been hailed by digital asset executives as a step in the right direction because it gives the industry the necessary legal backing.
Despite this, a cross-section of crypto users have argued that due to the nature of digital assets, it should not be taxed like other assets with some alleging the ‘harsh’ taxes are deliberate moves against the industry.
Several users have deployed privacy coins like Monero to mask their transactions and identity including trading on decentralized exchanges (DEXs). The recent trend has seen the government double up efforts to crack down on crypto tax evasion.
In South Korea, the government has seized about 260 billion won ($180 billion) in the last couple of years from crypto tax evaders including Seoul’s confiscation of $22 million from firms and executives.
The country amended its laws to seize digital assets from non-tax paying residents in 2021 joining the United States and Argentina who seized over 1000 wallets linked with tax evaders.