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South Korea's Gyeonggi Provincial Tax Justice Department Launches a System for Detection of Crypto Tax Evaders

The Gyeonggi province authorities come up with a solution for the crypto tax collection

The Gyeonggi Tax Department has harnessed digital innovation to tackle the persistent issue of tax evasion among crypto account holders. Utilizing resident registration data, the department has adeptly traced mobile phone numbers to pinpoint accounts on virtual asset exchanges. This digital tracking system, a first of its kind, has not only streamlined the process of identifying tax delinquents but has also dramatically expedited the collection of non-declared taxes. In the past year alone, this method has facilitated the collection of a staggering 6.2 billion won ($4.6 million) from individuals skirting their tax obligations.

Previously, the painstaking process of requesting information from crypto exchanges on a case-by-case basis could extend up to six months. However, the innovative digital management system introduced by Gyeonggi province has remarkably reduced this timeframe to approximately 15 days, as reported by Yonhap News Agency. 

This efficiency boost has enabled the tax department to uncover the crypto accounts of 5,910 individuals, each owing upwards of 3 million won ($2,200) in local taxes. From this group, a total of 6.2 billion won ($4.6 million) was recouped from 2,390 offenders, underscoring the system's effectiveness in bolstering tax justice.

Enhanced cooperation with crypto exchanges

The success of Gyeonggi's digital tracking system in identifying tax evaders' crypto accounts is just the beginning. The province is now setting its sights on strengthening cooperation with virtual asset exchanges. This initiative aims to ensure a seamless flow of information critical for monitoring tax compliance. As part of this endeavor, Gyeonggi is keen on reviewing administrative measures to incentivize or compel exchanges to participate more fully in these efforts. 

Noh Seung-ho, the head of the Provincial Tax Justice Department, has been vocal about the commitment to this cause, stating: 

"We will continue to take strong collection action against unscrupulous delinquents, such as those who say they have no money to pay taxes and trade virtual assets."

Meanwhile, South Korea's Financial Intelligence Unit (FIU) complements these efforts by urging crypto exchanges to report suspicious transactions indicative of money laundering or illegal foreign exchange outflows. The FIU's proactive stance, including the planned launch of a "virtual asset analysis system," aims to dissect and trace the intricate movement paths of virtual asset transactions, further tightening the noose around illicit activities.

The recent update to the Virtual Asset Users Protection Act by the South Korean government introduces stringent penalties for violations related to crypto trading. This legislation, with its promise of significant criminal punishment, including imprisonment and hefty fines, serves as a deterrent against the misuse of digital currencies for illegal gains. Offenders found making more than 5 billion won ($3.8 million) from unlawful crypto trading face the possibility of life sentences.