Begging for votes

Populism fever is simmering ahead of the presidential election in March. Taxation on virtual assets — mostly cryptocurrency — will be suspended for a year. The National Assembly’s Strategy and Finance Committee approved a bill on income tax that proposes to put off taxation on virtual assets for a year.

Under the new outline, an investor earning more than 2.5 million won ($2,101) a year from investment in digital tokens is subject to a capital gains tax of 20 percent from January 2023. The bill will be put to vote in the National Assembly in early December after a review by the legislation committee.

The suspension impairs the basic idea of taxing any earnings in the taxation principle. The rivalling parties have reached a bipartisan agreement to put off the levy so as not to lose young voters. The Justice Party called the bipartisanship as “shadowy collusion” by the mainstream parties that would result in undermining fairness in taxation.

In a meeting with the government and the presidential office in September, the ruling Democratic Party (DP) agreed to enforce the levy on capital gains from cryptocurrency trade from next year as planned.

But the agreement shook upon pressing by DP presidential candidate Lee Jae-myung who argued that the crypto taxation should be synchronized with the enforcement of a new tax on capital gains from stock investment from January 2023. The DP only indulged the voters in their 20s and 30s most active in crypto investment to help win the presidential election.

The Strategy and Finance Ministry, which opposed the suspension had to yield in the face of legislative populism. Hong Nam-ki, deputy prime minister for economic affairs, reminded that he had reiterated the need for taxation from next year as the government has fully prepared for it ahead of the vote at the legislative committee. But he backed down and said the government would have to accept the legislative decision as law revisions were under the National Assembly authority. When taxation is suspended without clear grounds, the issue could revive in 2023.

Populist changes to policy plans have been common ahead of an election. The Finance Services Commission had to push back the resumption of stock short sales for two months until the Seoul and Busan mayoral by-elections in April on fear of irking retail investors who fear a market crash from the return of short selling.