The Tax Justice Department in Gyeonggi Province, South Korea's most populous province, made significant strides in combating tax evasion by leveraging a digital tracking system targeting individuals' undisclosed assets in 2023. With this initiative, the department successfully collected 6.2 billion won ($4.6 million) in undeclared taxes, as reported by Yonhap News Agency on February 22. Employing resident registration data and mobile phone numbers, tax authorities traced encrypted accounts on digital asset exchanges used by tax evaders.
The implementation of a digital tracking system marked a pivotal innovation in the province's efforts to tackle tax evasion. Previously, tax authorities had to engage in lengthy communication with cryptocurrency exchanges to obtain information on a case-by-case basis, a process that could take up to six months. However, the new digital management system developed by Gyeonggi Province streamlined this process, reducing the timeframe to approximately 15 days. Utilizing this system, the provincial tax department identified 5,910 individuals with crypto accounts who each owed more than 3 million won ($2,200) in taxes, ultimately collecting fines totaling 6.2 billion won ($4.6 million) from 2,390 offenders.
Looking ahead, Gyeonggi Province aims to bolster cooperation with virtual asset exchanges and evaluate management measures for platforms that fail to collaborate with tax authorities. Noh Seung-ho, director of the Provincial Department of Taxation and Justice, emphasized the department's commitment to taking decisive action against tax evaders, particularly those who claim financial incapacity to fulfill their tax obligations while engaging in virtual asset trading.
Meanwhile, South Korea's Financial Intelligence Unit (FIU) remains proactive in urging cryptocurrency exchanges to report any transactions suspected of money laundering or illegal foreign exchange outflows. The agency is also set to introduce a "virtual asset analysis system" to monitor and analyze transaction details and identify complex movement patterns. In early February, the South Korean government introduced updates to the Virtual Asset User Protection Act, imposing stringent penalties and fines, including imprisonment and substantial monetary penalties, for violations, particularly for individuals involved in illegal cryptocurrency trading schemes.
