The Gyeonggi Provincial Tax Justice Department, located in the most densely populated province of South Korea, successfully recovered 6.2 billion won ($4.6 million) in undeclared taxes in 2023. This achievement was made possible through the implementation of a digital tracking system specifically designed to target tax evaders’ cryptocurrency accounts.
According to a report by Yonhap News Agency on February 22nd, the tax department utilized the resident registration data of “delinquents” and traced their mobile phone numbers to identify their accounts on digital asset exchanges. This method proved to be highly effective in locating individuals who had not declared their taxes.
The key innovation behind this success is the digital tracking system. In the past, tax services had to individually request information from crypto exchanges, which often took up to six months due to the lengthy communication and document exchange process. However, the province’s digital management system significantly reduced this timeframe to approximately 15 days, streamlining the entire procedure.
By utilizing this system, the provincial tax department was able to identify the crypto accounts of 5,910 individuals, all of whom owed more than 3 million won ($2,200) in local taxes. As a result, the department successfully collected 6.2 billion won ($4.6 million) from 2,390 offenders.
Moving forward, the province intends to strengthen its collaboration with virtual asset exchanges and will consider implementing administrative measures against platforms that refuse to cooperate. Noh Seung-ho, the head of the Provincial Tax Justice Department, emphasized the importance of cooperation in tackling tax evasion.
In addition to the efforts of the Gyeonggi tax department, South Korea’s Financial Intelligence Unit (FIU) has actively encouraged crypto exchanges to report any suspicious transactions related to money laundering and illegal foreign exchange outflows. The agency also has plans to introduce a “virtual asset analysis system” that will track and analyze the details of virtual asset transactions, including their complex movement patterns.
To further combat illegal activities within the cryptocurrency market, the South Korean government updated the Virtual Asset Users Protection Act in early February. This legislation imposes severe penalties and fines for violations, including imprisonment and fines up to five times the amount of illegal profits. Specifically, individuals who make over 5 billion won ($3.8 million) from illegal crypto trading schemes may face life sentences.
In conclusion, the Gyeonggi Provincial Tax Justice Department’s successful recovery of non-declared taxes through its digital tracking system demonstrates the effectiveness of innovative approaches in combating tax evasion. With the support of the South Korean government and agencies like the FIU, efforts to regulate the cryptocurrency market and promote financial transparency continue to evolve and strengthen.