On the flip side of growing bitcoin adoption, the digital asset is being used to elude taxes in Korea. The intensified effort of the country’s tax agency towards curbing the menace is yielding results, according to a recent report.
Nothing is Hidden Under The Chain
Last month, the Korean government finalized its decision to levy taxes on bitcoin capital gains. The ruling was in line with the growing acceptance of the digital asset and its similarity with other taxable financial instruments. The law will take its due course from next year, but in the meantime, many Koreans have devised schemes to evade taxes using bitcoin.
Korea’s tax authority, NTS, checkmated the sinister plan. The National Tax Service said that it apprehended over 2400 Koreans for hiding assets amounting to 36.6 billion won ($32.24 million) through cryptocurrencies to avoid paying taxes on them.
Further findings revealed hidden bonds and cash that accrued to the tune of 10 million won in delinquent taxes. The agency reported it is closing in on 222 defaulters for other tax evasion cases. The law to impose a ban on bitcoin capital gains will improve transparency and potentially shut the door on cryptocurrency tax evasion. According to the proposed bill, investors and traders will pay 20% tax if they earn over 2.5 million won (almost $2300 at the present rate) from bitcoin and other cryptocurrencies.
When enacted, the bill will introduce clarity to the country’s tax laws. The lack of it formed the basis of Bithumb’s argument in its case against the NTS. Korean exchange, Bithumb had argued that the country’s law did not recognize cryptocurrencies as taxable properties by the laws after NTS slapped it with 80 million won in withholding tax.
Laser-Focus On Crypto Tax Evasion
As cryptocurrencies close in on traditional asset classes in terms of adoption, governments and regulatory bodies have likewise shifted their attention to them. While many governments recognize them as taxable assets, others have to battle against the possibility of digital assets abetting tax evasion.
The US Attorney General’s Cyber Digital Task Force listed tax evasion as one of the three categories of illicit cryptocurrency use in a comprehensive report. It outlined “money laundering and the shielding of legitimate activity from tax, reporting, or other legal requirements” in the report.
Last year, the Organization for Economic Co-operation and Development (OECD) encouraged regulatory bodies to adopt a uniform cryptocurrency tax approach. The intergovernmental economic organization wants a leveled playground as cryptocurrency use skyrockets continually.