South Korean authorities in the city of Cheongju have confirmed plans to seize the digital currency holdings of tax evaders.
The city’s administrators have requested seven digital currency exchanges to provide information about the transaction history of over 8,500 residents.
Authorities alleged that the affected individuals have unpaid taxes surpassing KRW 1 million (US$750), arising from the trade in digital currency transactions. Cheongju’s administrators say that residents are turning to digital assets as a tool to evade taxes, given their borderless nature and anonymity.
However, Cheongju says it is committed to recovering the unpaid taxes of over KRW 8.5 billion (US$6.3 million) from the tax delinquents. In its new tax crusade, authorities say they are willing to confiscate the digital currency holdings of offenders if the tax obligations remain unfulfilled to achieve this goal.
This is not Cheongju’s first attempt at cracking down on tax evasion using digital assets. In 2022, the city recovered unpaid taxes worth KRW 68 million (US$51 million) from 17 individuals attempting to use digital currencies to avoid paying taxes.
Following a 2021 revision of the country’s tax code, South Korean law supports Cheongju’s confiscation of digital currencies. Authorities proposed granting tax watchdogs broad powers to seize digital asset holdings of defaulters in centralized entities to deal with rising welfare costs for an aging population.
Armed with the new amendments, municipal governments have since recovered over KRW 268 billion (US$200 million) in digital currencies over default in taxes. The crackdown affected individuals and corporate entities, with digital asset exchange Bithumb hounded by the South Korean National Tax Service (NTS) over KRW 91 billion (US$68 million) worth of unpaid taxes.
Other jurisdictions are adopting a similar hands-on approach in dealing with tax evasion, with Argentina confirming the seizure of over 1,000 wallets.
Chief counsel for the U.S. Internal Revenue Service (IRS) Robert Wearing disclosed that since digital assets are considered property, “the IRS will seize that property and will attempt to follow its usual procedures to sell it and use it to satisfy collection.”
Cleaning up the industry
As South Korea moves on from Terra’s implosion, regulators are proceeding with new guidelines to protect its investors. In the future, digital asset service providers are anticipated to consistently disclose information to regulators as they operate in accordance with global best practices.
Regulators also keep themselves in check with the Financial Services Commission (FSC) urging staff to publicly disclose their digital currency holdings. Following the uproar that trailed lawmaker Kim Nam-kuk’s digital currency holdings, parliamentarians and other public officers must also disclose their digital assets publicly.
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