20% crypto tax is critical issue in next South Korea presidential election

Candidates and possible contenders in South Korea’s next presidential election call for delaying a plan to tax virtual assets — currently scheduled to begin in January — in a bid to appeal to millennial and Generation Z voters.

Fast facts

• Lawmakers from both the ruling democratic party and the opposition party have spoken out against levying income taxes on virtual assets beginning in January 2022. Lee Jae-myung, the presidential candidate for the democratic party, said in May the virtual asset tax needs to start a year later, while Hong Jun-pyo, a member of the conservative party who announced he is running for the presidential election, also criticized the tax policy as insensitive, saying it will retrograde the industry. Moreover, there have been four proposals by other lawmakers to push back the levy on crypto gains.

• Investors in their 20s and 30s, whose stake in virtual assets are higher than that of other age groups, have been strongly opposed to the crypto tax law since its announcement.  The number of crypto investors in their 20s and 30s made up nearly 60% of the total number of investors in Korea’s four major exchanges in the first quarter of this year, according to data from the Financial Services Commission. Korean media reports that the political agenda on taxing virtual asset income is emerging as an important variable in the upcoming election that will determine the votes of people in their 20s and 30s.

• Cha Dong-jun, professor of tax accounting at Kyungbok University, told Forkast.News the coming presidential election in March 2022 has affected the remarks and proposals from the lawmakers. The National Assembly is to review the proposed bills on postponing the virtual asset tax this December, which coincides with the pre-election season. “I think there’s a good chance for the tax law to be actually pushed back,” Cha said. “Both parties will not do anything at risk of losing votes.”

• Currently, South Korea’s tax law amendment mandates that income from virtual assets over the amount of 2.5 million won (about US$2,105) be taxed at a 20% rate starting on Jan.1, 2022. The announcement sparked controversy, with investors saying the taxation is unfair, as crypto income is to be taxed over 2.5 million won, while a 20% tax on stock capital gains is scheduled to start on Jan. 1, 2023 at 50 million won, around US$42,100.