On July 26, South Korea’s finance ministry announced that they would toughen rules on tax evasion by cryptocurrency investors and high-income earners. By this, they seek new revenue to cover surging welfare costs.
From next year onwards, the government formulates revising tax codes so that tax councils will invade crypto properties held by tax dodgers even if their cryptocurrencies are stored in a digital wallet. Current laws make it hard for authorities to seize virtually assets held in digital wallets. However, those available through exchanges can be confiscated to pay overdue taxes.
Going after tax evaders is part of South Korea’s broader examination to tighten supervision of crypto markets to eliminate money laundering. And other financial crimes using cryptocurrencies, as President Moon Jae aims to expand the tax base to raise fund welfare spending. The government has been increasing taxes from high-money earners to ensure wealthy citizens share the responsibility of growing the costs of an aging population. Moreover, according to 2020, South Korea became the world’s fastest aging nation with the lowest birth rate.
The Proposition’s Aim
This proposition is one pillar of the government’s once-a-year survey of its tax system, which seeks to modify a total of 16 tax codes. According to the ministry, the revisions will direct to a decline in tax income of at least 1.5 trillion won between now and 2026, as tax development and research in batteries, semiconductors, and vaccines more than offset any additional income expected from high-income earners.
Hong Nam-ki, South Korea’s finance minister, said that 1.5 trillion couldn’t be defined as tax neutral, which is not that huge of an amount and something essential as they revised tax codes.
Also, the government proposed expanding tax inducements to firms for hiring outside the capital Seoul significantly and proposed to cut corporate revenue for firms reshoring production capacities. Furthermore, the statement said that the ministry would submit the tax review to parliament by September 3 as the program needs approval from lawmakers to be enforceable.