ASIA: South Korea tracks tax evaders’ crypto with new digital system

The South Korean government has introduced a new digital system to track tax evaders’ cryptocurrency transactions.

In a bid to crack down on tax evaders, the Gyeonggi tax department in South Korea has linked the resident registration data of delinquents with their mobile phone numbers to detect their accounts on cryptocurrency exchanges.

The Gyeonggi Provincial Tax Justice Department in South Korea has implemented a digital tracking system to find the crypto accounts of tax evaders, resulting in 6.2 billion won ($4.6 million) in unreported taxes being collected in 2023. The digital tracking system seems to be having an impact on catching people who are trying to evade taxes by using crypto.

The Gyeonggi tax department has linked the resident registration data of people who have failed to report their income to their mobile phone numbers, in order to identify their accounts on cryptocurrency exchanges, according to a report by Yonhap News Agency on Feb. 22.

The main innovation here is the digital tracking system, which is a step up from the previous method of requesting information from crypto exchanges on a case-by-case basis.

The old process of requesting information from crypto exchanges on a case-by-case basis was slow and time-consuming, taking up to six months to complete.

The province’s new digital management system has shortened the process from six months to only 15 days.

The new system has helped the tax department to identify the crypto accounts of over 5,900 individuals, each of whom owes over 3 million won in taxes.

The tax department has successfully collected 6.2 billion won($ 4.6 million)from almost 2,400 people who were avoiding paying their taxes.

The province has announced plans to work more closely with virtual asset exchanges, and to consider administrative measures for any platforms that do not cooperate.

Noh Seung-ho, the head of the Provincial Tax Justice Department, said:

“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.”

The South Korean Financial Intelligence Unit has been actively encouraging crypto exchanges to report any transactions that seem suspicious, especially those that may involve money laundering or illegal foreign exchange outflows.

The agency also plans to introduce a new system that will track and analyze the details of virtual asset transactions, as well as the complex movement of assets.

In early February, the South Korean government issued an updated version of the Virtual Asset Users Protection Act.

The legislation outlines harsh penalties for violations, including fixed-term imprisonment for more than a year or a fine up to five times the amount of illegal profits.