Crypto Assets of South Korean Tax Evaders Face Impending Seizure - Excerpts

Crypto Assets of South Korean Tax Evaders Face Impending Seizure – Excerpts

Updated: 23 August 2023

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According to a report from the local news agency Yonhap, the city of Cheongju in South Korea has announced its intention to initiate the seizure of cryptocurrency from individuals evading local taxes.

This measure entails that individuals surpassing a specific threshold of outstanding crypto tax will face the forfeiture of their cryptocurrency holdings by the authorities.

7 Exchanges Asked to Investigate Tax Evaders’ Holdings

On August 22, a report from Yonhap highlighted that the city of Cheongju in South Korea’s North Chungcheong province was considering implementing regulations that would allow them to directly seize funds from cryptocurrency exchanges where tax evaders store their crypto assets.

According to Yonhap, the Cheongju administration had already reached out to seven South Korean cryptocurrency exchanges to investigate the holdings of numerous tax evaders within the region. Over the combined years of 2022 and 2021, the South Korean government successfully confiscated and recovered approximately 260 billion Korean won (equivalent to $180 million) worth of cryptocurrencies from tax evaders.

📢 South Korea's Cheongju city vows to take action against tax evaders, planning to seize cryptocurrency from individuals with outstanding crypto taxes of $750 or more. 💰🔒 #TaxEvasion #CryptoTaxes #SouthKorea

— Block Savvy (@Block_Savvy) August 22, 2023

Under the new plan, investors are required to ensure that they have less than 750,000 Korean won (about $750) in outstanding tax dues; failure to settle this amount may result in the seizure of their tokens from the exchanges. The city administration expressed concern that cryptocurrencies have increasingly been used as a method of concealing assets in South Korea. This fresh approach seeks to hold South Korean residents who have avoided their tax obligations accountable.

The report further detailed that city authorities had reportedly instructed trading platforms like Upbit and Bithumb to investigate the crypto holdings of 8,520 users who owe a minimum of 1 million Korean won ($750) in local taxes. The authorities even reached out and requested 7 other exchanges to also provide information.

Plan of Seizures in Sync with Latest Developments

The implementation of seizure plans has been a somewhat anticipated step, contrary to what many might assume. This move aligns with the South Korean government’s earlier enactment of laws that empower regulators to confiscate cryptocurrencies, including Bitcoin, from individuals with outstanding tax liabilities in 2021.

Under these regulations, the South Korean government not only gained access to individual user accounts but also introduced additional measures. These included imposing higher taxes on affluent individuals and conglomerates, along with stringent actions against money laundering and tax evasion across sectors, including the digital assets industry.

Tax-related seizures of cryptocurrencies have been on the rise in South Korea in recent times. When combining the years 2022 and 2021, the South Korean government successfully confiscated a substantial sum of 260 billion Korean won, equivalent to $180 million, from tax evaders. In 2021, the administration of Seoul, the capital city of South Korea, seized cryptocurrency assets worth 25 billion won ($22 million) from both individuals and corporate leaders.

Other Countries Have Also Been Adopting the Same Method

While not many countries have vested such extensive authority in their governments, there are still nations assisting authorities in obtaining control over individual accounts, similar to South Korea’s approach. Instances of governments gaining the ability to locate tax evaders and confiscate their funds become feasible with the introduction of enabling laws. Argentina stands as an example, where the government seized over 1,000 cryptocurrency wallets associated with taxpayers who were in arrears.

In such cases, legislative changes empower governments to act against tax evasion by utilizing advancements in cryptocurrency technology. This approach not only bolsters revenue collection but also reinforces the notion of accountability in the digital realm. As global regulatory landscapes evolve, instances like those in South Korea and Argentina highlight how governments are increasingly adapting to tackle tax evasion in the context of emerging financial technologies.