Pressure is growing on the South Korean government to back down over a controversial crypto tax law that will see trading profits over an annual total of USD 2,100 taxed at 20%.
Per the Segye Ilbo, the “dominant feeling” among analysts is that the ruling Democratic Party will try to force through a measure to defer the tax by at least a year in order to avoid risking the ire of younger voters in the run-up to next year’s elections.
As previously reported, the tax is due to come into force on January 1, 2022 – just weeks before South Korea goes to the polls on March 9 to elect its next president.
The same media outlet reported that any move to delay would be “conscious of the voting behavior” of the so-called “2030 generation” – urban-dwelling citizens aged 20-39. This demographic has become increasingly crypto-keen. But it also formed the backbone of a groundswell of support that ousted former President Park Geun-hye and helped the incumbent President Moon Jae-in sweep to power in a landslide victory in 2017.
The government’s refusal to budge on the issue of crypto tax has led to outrage from younger citizens, who have petitioned the government to urgently review the tax rules. The same media outlet reported that the “pressure to defer” from political sources would likely “intensify,” leading political analysts to conclude that “the government will eventually raise the white flag” over the issue.
Online forums and chat rooms are now thronging with crypto investors who are now overtly “critical of the Ministry of Finance,” which is so far claiming that it will stick to its guns.
But online communities are now confident that the tax “will be postponed ahead of the Presidential Election.”
An unnamed crypto investor was quoted as stating:
“If you consider how young people in the 2030 demographic are being driven into cryptocurrency investment due to skyrocketing house prices and so on, it only makes sense that [crypto tax] should be suspended next year.”
Numerous Democratic Party members have spoken out publicly against the tax – most notably the party’s own nominee for the presidency, the former Gyeonggi Province Governor Lee Jae-myung who has spoken of the need to “embrace” crypto “within the [financial] system” to eliminate risk for investors. He also stated that he was in favor of deferring until 2023, when the government will also “start taxing gains on stock-related transactions.”
All of this has proved grist to the mill for the main opposition People’s Power Party, which has criticized the Moon administration for “abandoning” the crypto market and simply seeking to make money from it in the form of tax revenue.
The latest assault came from the MP Cho Kyung-tae, a key member of the campaign backing the candidate Hong Jun-pyo. Cho claimed that young South Koreans were being forced to “cry tears of blood” because they would be obliged to pay high taxes on the crypto investments paid for with their hard-earned money by an uncaring government.
According to EDaily and OhMyNews, Cho called on the government to “withdraw” the crypto tax plans and instead focus on helping crypto buyers. The MP was quoted as stating:
“The government’s job is to prepare measures to protect [crypto] investors, not taxation.”
Cho continued:
“The crypto craze among young people in Korea in the 2030 demographic stems from anxiety they feel about an uncertain future. When wealthy people invested in real estate, young people felt a sense of alienation. But the Moon Jae-in government does not even let them do that [invest in crypto]. The Moon Jae-in administration should not be talking of collecting taxes while it is still not able to protect investors from harm.”
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