South Korean Lawmaker Urges Repeal of Upcoming 22% Crypto Tax

South Korean Lawmaker Urges Repeal of Upcoming 22% Crypto Tax

A South Korean lawmaker is calling for the government to retract its proposed 22% tax on gains from virtual assets, which is set to take effect on January 1, 2027. Lawmaker Park Soo-young argues that the tax unfairly targets approximately 13 million crypto users in the country, especially as taxes on domestic stocks have been abolished.

Concerns About Capital Flight

Park voiced his concerns during a recent online discussion on his YouTube channel, “Park Soo-young’s Economy TV” where he described the forthcoming taxation as a “punitive policy” that could accelerate the movement of South Korean capital to foreign cryptocurrency exchanges. He warned that this taxation might discourage investment in local markets rather than encourage it.

Details of the Proposed Tax

Under the current framework, profits from the transfer or lending of digital assets would be classified as other income starting in 2027. Investors will be allowed an annual deduction of 2.5 million won, and any gains exceeding this amount will be taxed at 20%. With the inclusion of a 2% local income tax, the effective tax rate amounts to 22%.

Political Opposition Intensifies

Despite the government’s insistence on moving forward with the implementation of the tax, political opposition continues to grow. The ruling People Power Party is pushing for amendments to abolish or delay the tax, highlighting concerns about the unequal treatment of different asset classes. This follows prior delays of the tax’s implementation originally proposed in 2020.

Investors’ Risks and Regulatory Scrutiny

As the tax deadline approaches, critics like Park have highlighted risks associated with the taxation of cryptocurrencies, particularly the inability to carry forward losses in a declining market. Park emphasized, “The losses suffered from a crypto crash cannot even be carried forward,” underscoring what he perceives as unfair treatment of crypto investors.

Recent data indicates that approximately 124 trillion won flowed into overseas crypto exchanges from January to September last year, with regulators increasing scrutiny on significant outflows from domestic exchanges. Regulatory changes have also begun to classify certain virtual asset transactions under South Korea’s foreign-exchange framework, prompting further concerns about investor migration.

Next Steps for the Proposed Tax

A public petition seeking the complete repeal of the crypto tax has garnered over 50,000 signatures, demanding legislative review as the enforcement date nears. The government maintains plans to implement the tax in line with existing laws unless significant changes arise from ongoing legislative discussions.