PPP, DAXA hold policy forum on digital asset taxation
Public hearing on digital asset framework law planned for this year
Party says Jan. 1 tax launch 'premature'
The People Power Party called Monday for a review of the planned digital asset tax set to take effect in January, warning that imposing the levy while the financial investment income tax has already been scrapped could burden young investors and drive capital overseas.
The PPP and the Digital Asset eXchange Alliance (DAXA) co-hosted a policy forum on improving the digital asset taxation regime at the National Assembly in Yeouido on Monday. PPP Floor Leader Jeong Jeom-sik, Policy Committee Chair Lim Yi-ja, lawmakers Seo Il-jun, Song Eon-seog, Park Soo-young and Choi Su-jin, representatives from the five major won-denominated exchanges, and DAXA standing vice chairman Kim Jae-jin attended.
"Countless young people are participating in the digital asset market amid soaring prices, a stagnant job market and a reality where buying a home on wages alone is nearly impossible," Jeong said. "If we rush ahead with taxation while ignoring that reality, the confusion and burden will ultimately fall on young investors."
He also said it was necessary to examine whether applying the current tax framework — with the financial investment income tax already abolished — meets the standard of tax equity across asset classes, and whether it is appropriate to press ahead with the taxation schedule when the industry's institutional foundation has yet to be established.
Policy Committee Chair Lim identified the calculation of acquisition costs as a key problem with implementing the tax. "There are cases where it is difficult to accurately determine when and at what price digital assets transferred from overseas exchanges or personal wallets into domestic exchanges were purchased," she said. "It must be made clear what is being taxed, and taxpayers must be able to predict how much they will owe."
Oh Se-jin, chief executive of DigitalX, said the user protection law has been enacted to regulate the digital asset market but remains incomplete. "Regulatory uncertainty is inevitably a risk for both businesses and investors," he said.
After the forum, PPP lawmaker Choi Su-jin said there was broad agreement that it would be difficult to win public support for taxing digital assets before a basic framework law is in place and even basic industry terminology has been defined. "The party's position is still that digital asset taxation at this stage is premature," she said.
Concerns were also raised at the forum that pressing ahead with the tax could shrink the domestic industry through capital outflows, ultimately outweighing any gains in tax revenue.
Choi said the government had previously offered incentives to bring overseas assets into the domestic market through single-stock leveraged products. "The exact opposite would happen" if the tax is imposed, she said, adding that the risk of a contraction in the digital asset industry was the central topic of discussion at Monday's forum.
On the digital asset framework law, Choi said the government has drafted a basic law and plans to hold a public hearing soon. "The hearing is expected to present a draft or the basic law, and there will continue to be opportunities to gather opinions on taxation as well," she said.
The digital asset tax was originally set to take effect in 2022 but has been delayed three times, with the current implementation date set for Jan. 1. The government has maintained its position that it will proceed with the tax on schedule.
Lee Hyeong-il, nominee for deputy prime minister and minister of economy and finance, said at his confirmation hearing last Tuesday that the impact of launching the tax now "will not be as large as expected."
The National Tax Service is also reportedly preparing to announce a draft notice on digital asset taxation in October. Choi said she believes the NTS should state its position once it releases its guidelines, but added that she has doubts about whether all the outstanding issues can be resolved before January.
kyoung@heraldcorp.com
