In a resolute effort to combat tax evasion, authorities in the South Korean city of Cheongju have unveiled plans to seize digital currency holdings owned by tax evaders.
City administrators have initiated contact with seven digital currency exchanges, soliciting comprehensive transaction history data pertaining to more than 8,500 residents.
The allegations put forth by authorities assert that these individuals harbor unpaid taxes exceeding KRW 1 million (equivalent to US$750), stemming from their involvement in digital currency trading. According to Cheongju’s administrators, residents are resorting to digital assets as a means to elude taxes, leveraging the borderless nature and inherent anonymity of such transactions.
Nevertheless, Cheongju Municipality remains steadfast in its commitment to reclaim the outstanding taxes totaling over KRW 8.5 billion (equivalent to US$6.3 million) from the defaulters. Underpinning this ambitious tax enforcement drive is the city’s assertion that it is prepared to appropriate the digital currency assets owned by offenders should they fail to meet their tax obligations.
This recent endeavor is not Cheongju’s inaugural foray into curbing tax evasion via digital assets. In 2022, the city effectively recuperated KRW 68 million (equivalent to US$51 million) in unpaid taxes from 17 individuals who sought to exploit digital currencies as a means of circumventing their tax responsibilities.
Following a pivotal revision to the nation’s tax legislation in 2021, South Korean law now extends support to Cheongju’s endeavor to confiscate digital currencies. Authorities proposed empowering tax oversight bodies with sweeping authority to seize digital asset holdings from defaulters within centralized entities, as a strategic response to mounting welfare costs precipitated by an aging demographic.
Equipped with these legislative revisions, municipal administrations have already reclaimed more than KRW 268 billion (equivalent to US$200 million) in digital currencies from tax delinquents. This crackdown has encompassed both individuals and corporate entities, with Bithumb, a prominent digital asset exchange, coming under scrutiny from the South Korean National Tax Service (NTS) over unpaid taxes amounting to KRW 91 billion (equivalent to US$68 million).
This proactive stance against tax evasion is being mirrored in other global jurisdictions, with Argentina recently confirming the seizure of over 1,000 digital wallets.
Chief Counsel for the U.S. Internal Revenue Service (IRS), Robert Wearing, emphasized that due to the classification of digital assets as property, “the IRS will seize that property and will attempt to follow its usual procedures to sell it and use it to satisfy collection.”
Industry Overhaul and Regulatory Safeguards
As South Korea emerges from the aftermath of Terra’s collapse, regulators are diligently crafting new guidelines aimed at safeguarding investors. In forthcoming times, digital asset service providers are expected to consistently disclose operational information to regulatory bodies, aligning their practices with global standards.
Regulators themselves are not exempt from scrutiny, with the Financial Services Commission (FSC) encouraging its personnel to publicly disclose their digital currency holdings. In response to the controversy ignited by lawmaker Kim Nam-kuk’s digital asset holdings, parliamentarians and other public officials are now also mandated to make public declarations of their digital assets.
