The Gyeonggi Provincial Tax Justice Department — the most densely populated province in South Korea — collected 6.2 billion won ($4.6 million) of non-declared taxes in 2023 after implementing a digital tracking system aimed at the crypto accounts of tax evaders.
According to a report by Yonhap News Agency on Feb. 22, the Gyeonggi tax department used the resident registration data of “delinquents,” tracing their mobile phone numbers to detect their accounts on digital asset exchanges.
The principal innovation is a digital tracking system. Previously, the tax services had to request information from crypto exchanges on a case-by-case basis. The communication and document exchange took up to six months. According to Yonhap, the digital management system developed by the province reduced this process to around 15 days.
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Using the system, the provincial tax department found the crypto accounts of 5,910 individuals, each owing more than 3 million won ($2,200) in local taxes. The department collected 6.2 billion won ($4.6 million) from 2,390 offenders.
The province plans to strengthen cooperation with virtual asset exchanges and to “review administrative measures” for those platforms refusing to cooperate. As Noh Seung-ho, head of the Provincial Tax Justice Department, stated:
“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) has actively encouraged crypto exchanges to report any transactions that raise suspicions of money laundering and an illegal “foreign exchange outflow.” The agency also plans to launch a “virtual asset analysis system,” tracking and analyzing virtual asset transaction details and “complex movement paths.”
The South Korean government issued a new update to the Virtual Asset Users Protection Act in early February. The legislation imposes significant criminal punishment measures and fines for violations, including fixed-term imprisonment of more than one year or a fine of three to five times the amount of illegal profits. Criminals who make more than 5 billion won ($3.8 million) from illegal crypto trading schemes face life sentences.
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