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The government’s waffling on the crypto tax, which is due to take effect in 2022, has created a tangle of contradictory stories that even officials can’t seem to keep pace of.
South Korean officials have caused confusion this year by making contradictory pronouncements about the possibility of repealing or amending the forthcoming crypto tax, which is due to take effect in 2022.
Throughout 2021, debate in South Korea’s National Assembly grew more intense on whether or not to modify the crypto tax. If the tax remains intact, it will collect a 20% tax on income earned by crypto transactions that exceeds 2.5 million Korean won ($2,100).
The newest example of ambiguity in the country’s crypto asset legislation is nonfungible token (NFT) regulations.
Based on Financial Action Task Force rules that treat NFTs differently than cryptocurrencies, Financial Services Commission (FSC) authorities said unequivocally on Nov. 5 that NFTs will not be subject to the crypto tax.
But that decision was effectively reversed on Tuesday when FSC Vice Chairman Do Gyu-sang said:
“The Ministry of Strategy and Finance is preparing tax provisions for NFTs in accordance with the Special Reporting Act.”
The Special Reporting Act dictates regulations for cryptocurrency, including taxation.
Some are skeptical that the government has the best interests of the crypto industry in mind as the official policy direction seems to change direction so frequently. StableNode’s Nam Doo-wan tweeted on Wednesday, “Korean gov: ‘We might flip our position but you crypto heads will be slapped till that happens.’”
Several efforts to delay the tax from the Democratic Party, which has a majority in the legislature, had gathered traction in the National Assembly since April 2021, until they were killed by Finance Minister Hong Nam-ki of the opposing party. The same thing happened in September, and it’ll probably happen again before the end of the year.
While the conflict between opposing parties is a matter of fact, there is also an element of misinformation, as news outlets have reported inaccurately that the tax has been delayed. This is a source of confusion for stakeholders in Korea’s crypto industry and is exacerbated by non-Korean-speaking journalists reporting on the issues.
“With presidential elections coming up next March, the Democratic Party is seeking to win favour with the 20s–30s age bracket by delaying the tax,” Jun Hyuk Ahn, head of communications at VegaX Holdings, told Cointelegraph.
Despite the fact that the FSC has proven that there is internal debate over how to enforce the law as worded, Ahn pointed out that “the ability to modify the law belongs with the National Assembly.”
The Democratic Party’s capacity to modify the law has been impeded by political party politics in the National Assembly, where it has had to compete with Minister Hong.