The Korean tax Policy Association has recently had its experts propose for a low-level trading tax, instead of an actual transfer income tax when it comes to profits gained through cryptocurrencies. This comes just as Korea’s government is gearing up to the inclusion of taxation of crypto within its tax reform plan, which will go into effect at the start of 2021. The reasoning behind the recommendation is the lack of application infrastructure to enact transfer taxation.
Infrastructure Not Being Present
These tax experts have pushed out a proposal that leverages a low-level trading tax to handle crypto taxation, having done this on the 21st of February within a seminar. As such, they’ve advised the South Korean government to enact this taxation, before subjecting its people to a transfer income tax, as reported by Business Korea, a local news outlet.
The experts wholeheartedly agreed that a transfer income tax’s application would be a more accurate tool to tax profits made from crypto, but stressed that it shouldn’t be directly imposed. Instead, they recommend the implementation of a low-level trading tax at first, then gradually transfer this to income tax within the crypto industry.
Development of Framework Recommended
The Korea Blockchain Association further supports this proposal from the Tax Experts. According to the Association, prior legislation must first be added to support transfer income taxation, before it should be implemented.
They explained that the laws that should be in place to cause the transfer tax to work smoothly, simply aren’t there. As such, the Korea Blockchain Association believes that there is inadequate taxation infrastructure to do transfer income tax regarding cryptocurrencies. Due to this, they explain that supplements need to be incorporated to compensate for the lack of calculation.
Proper Information Needed
The Blockchain Association further recommends that Korea’s government improve the process of expense calculation, suggesting they start at the acquisition costs. Through determining the value of the crypto in question, it would be easy to include income taxation on it. Should this infrastructure be in place, the Blockchain Association believes that moving away from low-level trading taxation would be the best choice.
The Association explains that the first thing that needs to be clarified before imposing a transfer tax is acquisition costs. However, it’s tough to define acquisition costs when it comes to cryptocurrencies, due to various exchanges trading at multiple rates. To further complicate matters, related information and data tend to be restricted.