Virtual Asset Tax Repeal Petition Nears 50,000 Signatures

A National Assembly petition calling for the abolition of taxes on virtual asset trading income, scheduled to take effect in January next year, has garnered the support of 48,758 people, 98% of its target, just eight days after its launch. If this petition reaches 50,000 signatures, it will proceed to the discussion phase in a relevant National Assembly standing committee.

The petitioner argued that taxation without adequate institutional foundations, investor protection measures, international fairness, or consideration of market realities could lead to public burden and industry contraction. Despite the fact that taxation items, rates, and business structures could vary depending on the legal nature of digital assets, the taxation schedule approached without clear standards. The petitioner pointed to a lack of guidance on taxable items and reporting methods, expressing concern over a lack of predictability. Furthermore, they argued that proceeding with separate taxation solely on virtual assets, while tax on general stock investors has been eased due to the abolition of the financial investment income tax, raises issues of policy consistency and fairness among investors. Considering the high volatility and insufficient investor protection measures in the virtual asset market, the petitioner emphasized that taxation is not merely a debate over tax rates but a policy judgment on the nation's future financial industry development direction. They warned that forcing taxation for short-term revenue gains could lead to long-term losses from industry contraction and brain drain overseas.

The issue of fairness in virtual asset taxation is specifically highlighted in comparison to the stock market. While the stock market maintains a de facto tax-exempt system for capital gains of general investors, virtual assets are immediately subject to taxation with a low exemption threshold of 2.5 million won. Stocks are allowed to carry forward losses, but virtual assets, classified as other income, are excluded from loss carry-forward deductions, creating an issue of fairness between assets with similar investment characteristics.

The current market reality, characterized by a prolonged downturn, is also cited as a problem with the forced taxation. The virtual asset market is currently experiencing significant losses for the majority of investors, with the scale of losses far exceeding actual income. Forcing taxation in such a situation poses problems in terms of policy effectiveness and public consensus. Virtual assets are often perceived by young people struggling with soaring real estate prices as an opportunity for asset formation, and concerns are raised that additional tax burdens could further limit their opportunities for wealth building. The current taxation system does not sufficiently reflect high volatility, and given the frequent large valuation gains and sharp declines characteristic of the market, there is a possibility of tax burdens diverging from perceived income due to systemic deficiencies. This could not only harm investors' financial stability but also negatively impact normal economic activities.

The petitioner insists that the current virtual asset taxation system requires fundamental reconsideration, beyond mere supplementation or postponement. They argue that taxation without established institutional foundations, investor protection, international fairness, and consideration of market realities could lead to public burden and industry contraction, thus necessitating an urgent re-discussion, including abolition.