Opposition Party Faces Dilemma Over Virtual Asset Tax Deferral

One-Year Grace Period Practically Set as Party Policy
Support Grows for Candidate Lee Jae-myung's Grace Period
Criticism Over Policy Consistency and Populism

[Image source=Yonhap News]

[Asia Economy Reporters Koo Chae-eun and Jeon Jin-young] As the proposed legislation to postpone virtual asset taxation by one year, suggested by Lee Jae-myung, the Democratic Party presidential candidate, gains momentum for passage within the year, criticism is also growing. The apparent reason is that the 'taxation infrastructure' is insufficient to tax according to the timing of last year's Income Tax Act amendment (taxing gains realized in 2022 starting from 2023), but the government's position conflicts with this, and there are concerns that overturning a law passed a year ago ahead of the election undermines policy consistency. Critics argue that this is an excessive legislative move to appease the 2030 voter base, which is a 'vulnerable' support group for candidate Lee.

On the 12th, Floor Leader Yoon Ho-jung appeared on the radio and said, "For taxation to be possible from next year, a taxpayer infrastructure had to be in place, and after discussions among the high-level party, government, and presidential office, we assessed the level of preparation, but there was a problem with the infrastructure itself." He added, "Therefore, I proposed postponing it by one year to align with 2023, when the taxation system for financial investment income fundamentally changes, and this was partially discussed among the high-level party, government, and presidential office," lending support to the tax deferral. Candidate Lee also stated at the 'Youth Talk about Virtual Assets' meeting held at the National Assembly on the 11th, "Because the virtual asset market is taboo, it is seen as abnormal or as doing something forbidden, so there is an aspect of wanting to impose disadvantages in the tax system," and argued that the taxation timing should be postponed by about a year.

However, there is considerable criticism of the National Assembly's move to repeal the Income Tax Act passed a year ago and postpone taxation. In December last year, the National Assembly classified profits earned from virtual assets as 'other income,' similar to lottery winnings. Additionally, it passed an amendment to the Income Tax Act that, starting January next year, deducts 2.5 million KRW annually from virtual asset income and applies a 20% tax rate on the excess. On the 8th, Deputy Prime Minister for Economy Hong Nam-ki stated at the National Assembly's Planning and Finance Committee full meeting, "(From the government's standpoint) the ruling and opposition parties agreed to prepare for virtual asset taxation, so it does not seem appropriate to force agreement on postponement."

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