Democratic Party Raises Deduction Limit from 2.5 Million to 50 Million Won
Investors Cite "Abolition of Financial Investment Tax and Fairness Issues"
Han Dong-hoon Says "Cryptocurrency Taxation Should Be Postponed"
The Democratic Party of Korea is pushing to implement cryptocurrency taxation as scheduled without postponement. Cryptocurrency investors are opposing this, arguing that while the Democratic Party agreed to abolish the financial investment income tax (FIIT), implementing cryptocurrency taxation as planned is unfair.
On the 21st, Jin Seong-jun, the policy chief of the Democratic Party, said in a phone interview with Asia Economy, "We are considering raising the deduction limit from the existing 2.5 million won to 50 million won and implementing cryptocurrency taxation as scheduled," adding, "We promised to raise the deduction limit to 50 million won as a pledge for the 22nd general election." Since the chairman of the Planning and Finance Committee (PFC) and the subcommittee on taxation of the PFC, which handle the Income Tax Act that stipulates cryptocurrency taxation, are members of the People Power Party, the Democratic Party plans to first attempt a consensus-based resolution.
Cryptocurrency taxation is supposed to take effect on January 1 of next year as scheduled. According to the current Income Tax Act, 20% (22% including local tax) is taxed on the amount exceeding the basic deduction of 2.5 million won from cryptocurrency investment income. However, the Yoon Suk-yeol administration decided to postpone cryptocurrency taxation for two more years along with the abolition of the FIIT. Cryptocurrency taxation was set to be implemented on January 1, 2022, following the amendment of the Income Tax Act during the Moon Jae-in administration in 2020. However, it was postponed twice due to system deficiencies and public backlash.
Cryptocurrency investors are opposing the Democratic Party’s stance on cryptocurrency taxation, claiming it treats stocks and cryptocurrencies unequally. According to a National Assembly public petition, the petition titled "Request to Postpone Coin Taxation until January 1, 2025" had 55,737 supporters as of 8 a.m. that day. When a petition surpasses 50,000 supporters, it is referred to the relevant standing committee, and this threshold was reached within a day of the petition being posted. The petitioner, who introduced themselves as a person in their 20s, stated, "When the FIIT was abolished, I thought postponing cryptocurrency taxation was only a matter of time," and added, "Since they are the same type of investment, abolishing only one side causes fairness issues."
However, the Democratic Party views stocks and cryptocurrencies as having different characteristics. Stocks are connected to the real economy, whereas cryptocurrencies do not affect the economy beyond realizing gains or losses. They also cited differences in market conditions. Policy Chief Jin explained, "The FIIT was abolished because the stock market was struggling, but currently, the cryptocurrency market is booming." According to Upbit, a domestic cryptocurrency exchange, Bitcoin reached an all-time high of 133,328,000 won that day.
Meanwhile, the People Power Party pressured the Democratic Party to further postpone cryptocurrency taxation, citing public opinion and other reasons. On the previous day, Han Dong-hoon, the leader of the People Power Party, posted on his social media, "Cryptocurrency taxation should be postponed," and said, "We stood on the side of public sentiment to abolish the FIIT. We will do the same this time."
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