By Shelly Melancon (Switzerland)
In its measures to catch tax evaders, the national tax service of South Korea is now concentrating its efforts on catching those who use crypto assets for illegal purposes. The Korea Herald reports that the tax bureau has discovered over 2,450 tax dodgers hiding more than 37B won ($33 million) worth of assets in cryptocurrencies.
Who Is the Focus Of The NTS?
The NTS remarked that their current focus is on those owing at least 11 million won (approximately $9,000) in taxes, and they have been able to recover hard currency, bonds, and some other obscure assets from them. Now, the agency states that its next step is to probe these tax defaulters deeper. The NTS intends to achieve optimal results from their investigations. Hence, they are in liaison with crypto exchanges across South Korea to get full customer trading reports. Getting these full details shouldn’t be a problem because the country’s crypto space is highly regulated. All local crypto exchanges are compelled to verify their customers’ identities and keep a different record for any of them that perform any cryptocurrency transactions. Hence, crypto accounts with verifiable identities linked with any finance body, (including a bank) is the only way to trade virtual currencies in this part of the world. The tax office has already proposed tough sanctions for exchanges that do not comply with customer identification regulations.
Such regulations include:
- Not managing customers’ transactions records separately
- Not keeping relevant data on shady transactions
- Not reporting suspicious transaction activities.
However, under the new regulation, there is a 50% penalty abatement for all entities but which can be in excess for small-scale entities. Bithumb and other similar platforms have started scaling up their anti-money laundering processes. Recall that in December 2018, the NTS implemented similar special tax audits at Bithumb and Coinoneexchanges after which Bithumb were found to be guilty of evading $69 million in taxes. It is no wonder that Bithumb now disallows crypto account holders residing in regions without anti-money laundering policies from using its platform.
Why Is The NTS Centering Their Attention On Crypto Users Now?
A sharp rise in crypto trades in this region opened the awareness of the national tax securities in South Korea that there are tax defaulters who use cryptocurrencies as a shield to make their assets unverifiable. Yesterday’s trading figures showed that market activity from the South Korean stock market was a little less than that obtained from the country’s leading crypto exchanges. The NTS also discovered that there have been at least a 300% rise in crypto investors in South Korea in the last year. Thus, there has been an octuple surge in the volume of virtual currency trades.
NTS’ probe of tax defaulters using cryptocurrencies as a shield is one way to implement the “anti-social tax-dodging law.” However, the authorities’ decision to increase capital gains tax by 20% on all crypto trade profits above $2,300 will take effect starting from the first day of next year. While this plan is good for the crypto industry in the country, most investors are not happy because of the short period within which this law will be implemented.
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