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| Rep. Yoo Dong-soo, head of task force for cryptocurrency under ruling Democratic Party of Korea speaks at the beginning of a meeting at Yeouido, Seoul, June 23. Korea Times file |
By Lee Kyung-min
The ruling Democratic Party of Korea (DPK) has reached a consensus to delay imposing taxes on gains from cryptocurrency transactions, in a move to play to its voter base ― mostly those in their 20s and 30s who have invested heavily in the digital asset ― ahead of the presidential election next year.
The Ministry of Economy and Finance is expected to protest the party platform on the grounds of it defeating policy consistency. Yet the politically charged push is backed by the unified stance of ruling party lawmakers, whose popularity is rapidly declining due to a series of government policy failures notably concerning real estate.
"The DPK reached a broad consensus in terms of delaying the timing of the taxation of cryptocurrency transactions for another year than earlier planned," a DPK source told The Korea Times.
The move is expected to thwart the ministry's plan to impose a 20 percent tax on gains made in a one-year period of over 2.5 million won ($2,125) starting Jan. 1, next year; an enforcement postponed for three months from Oct. 1 due to a lack of taxation infrastructure.
Also backing the move is a slew of bills to be proposed by ruling party lawmakers, mostly on ways to delay the tax as well as a fundamental revision to it.
Rep. Yoo Dong-soo, head of the party's taskforce on cryptocurrencies, said the maximum deductible amount from crypto trading, the gains of which are defined as "other income," should be raised to 50 million won, the same amount granted to holders of financial assets including stocks and funds with over 60 percent of their investment in stocks.
"The amount of tax will be determined by the legal definition of the digital asset. We understand that the difference in the amount deductible between 50 million won and 2.5 million won is unfairly large to many investors," he said, Sept. 13.
Rep. Noh Woong-rae is of the same opinion. Postponing taxation on virtual assets in his view does not require permission from the finance ministry but a legislative push.
"Steamrolling the enforcement despite a clear lack of public understanding will not only undermine trust in the government but also lead to tax evasion," he said Sept, 16.
Similarly, two opposition party lawmakers ― Reps. Yun Chang-hyun and Yoo Gyeong-joon of People Power Party ― have proposed a bill seeking to delay imposing the tax for up to two years.
The debate is likely to result in a retreat in the government policy drive due to a fierce public backlash, as illustrated by the government failing to impose a strengthened requirement on "large shareholders" last year.
The minimum combined value of shares held by individual retail investors subject to capital gains tax of a rate between 22 percent and 33 percent was lowered to 300 million won ($265,600) from 1 billion won, three years ago with the scheduled enforcement on Jan. 1, this year.
However, the previous 1 billion won rule ended up being unchanged after thousands of people ― mostly those heavily invested in stocks amid pandemic-triggered cheap borrowing costs ― demanded the resignation of Deputy Prime Minister and Finance Minister Hong Nam-ki. He tendered his resignation, but Cheong Wa Dae refused to accept it.
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