Korean authorities seized more than WON53 billion ($47 million) in Bitcoin, Ethereum and other cryptocurrencies from 12,000 people accused of tax evasion, including a well-known TV host and a property mogul. Officials called it the largest tax seizure relating to cryptocurrencies in Korean history.
“We will do our utmost to protect law-abiding taxpayers and fulfil our fair taxation mandate by probing and tracing assets that tax dodgers may be concealing in the midst of the recent cryptocurrency trading fervour,” said Kim Ji-ye, director-general at the Gyeonggi Province Fairness Bureau.
South Korea’s 60 crypto exchanges must meet tough regulatory conditions to continue to operate after September, including partnering with local banks. Meanwhile, the authorities have begun confiscation procedures that could end in crypto-assets being liquidated if the owners do not pay their back taxes.
This is a part of a wider global trend towards increased regulation of cryptocurrencies. The US released a ‘Green Book’ in May including proposals to expand tax reporting requirements for crypto-assets. Meanwhile, the OECD has confirmed that its Common Reporting Standard (CRS) will be updated to cover cryptocurrencies and e-assets by the end of 2021. These will also fall under the eighth iteration of the EU’s Directive of Administrative Cooperation, DAC8.
Much like the US, South Korea is looking to constrain tax avoidance and evasion through crypto transactions. While the authorities are trying to seize assets, the Korean government is drafting a plan to extend existing tax measures to cryptocurrency trading.
ITR’s Women in Tax Forum – Europe was held this week:
Governments spend more on patent boxes
Records from the Global Tax Expenditures Database (GTED) show higher government spending on patent box regimes, one of a few options that may continue a race to the bottom despite the OECD’s pillar one and two proposals.
The GTED was released by the Council on Economic Policies (CEP) and the German Development Institute (DIE) on June 16, and marks a big step forward in tax transparency. It is a timely development as governments revise their spending to continue supporting multinational enterprises (MNEs) with tax breaks amid the COVID-19 pandemic while planning for higher corporate taxes and stricter tax administration in the longer-term.
“This will help with analysing the real economic benefits of the policies that are being pursued, and to understand what is implemented in other countries, especially when Africa is in dire need of revenues amid the COVID-19 pandemic,” said Nara Monkam, director of research at the African Tax Administration Forum (ATAF).
The G7 agreed in early June to a 15% global corporate tax floor, but governments that use low-tax policies to attract investment could find complex loopholes to lower the tax burden in their countries. This might introduce more complex tax competition, and which the GTED will be a key resource to track these international tax changes. The data is based on budgetary and tax base documentation, estimation methods, legal references, tax expenditure types, beneficiaries, and policy objectives.
“Tax expenditure transparency with tools such as GTED are an important by-product of the digital tax agenda and its relevant processes, including pillar one and two,” said David Bradbury, head of the tax policy and statistics division at the OECD. “This database is important in understanding how taxes are being raised as there are going to be continual budgetary pressures across jurisdictions and their tax administrations as a result of the pandemic.”
While the data is difficult to standardise because countries have different tax bases, GTED has already become useful in spotlighting higher government spending on patent box regimes amid negotiations on the OECD’s pillar one and two proposals.
Indian taxpayers wait for system glitches to be fixed
The Indian Revenue Service (IRS) allowed manual filings of forms 15CA and 15CB after glitches with the Infosys portal left multinational enterprises (MNEs) unable to complete their tax filings.
The Indian Ministry of Finance and the software company Infosys have attracted criticism for glitches in a tax portal that left taxpayers unable to complete their compliance. One consultancy firm sent the ministry a list of 32 different issues with the portal. The finance ministry has organised a meeting for June 22, at which taxpayers can share their complaints.
“The new portal has been fraught with several technical glitches/issues leading to taxpayer inconvenience,” said the Ministry of Finance in a press release on June 15.
India’s revenue authority has been forced to allow some manual forms while the problems are fixed, and tax professionals were quick to point out the irony of the situation.
“The big question is, in order to take a leap in technology, have we rather gone 10 years back in terms of manual ways of working?” said one head of tax at a multinational pharmaceutical company.
Multinational enterprises (MNEs) operating in India have faced a litany of problems with the Infosys e-filing portal since its launch on June 7. The glitches became apparent immediately, and the Indian Finance Minister Nirmala Sitharaman wrote on Twitter on June 8 that Infosys should “not let down our taxpayers in the quality of service being provided”. Infosys did not respond to a request for comment.
Next week in ITR
ITR will be following South Korea’s decision to impose greater tax regulations on cryptocurrency transactions. This is just the latest case of a government cracking down on crypto-assets over concerns of tax evasion and avoidance.
At the same time, the Indian GST system has raised questions for taxpayers that can only be resolved in court. Multinational companies have gone to the Mumbai High Court over whether Indian subsidiaries are liable for GST, but the case could go all the way to the Indian Supreme Court.
Meanwhile, multinational companies are hopeful that they can secure multilateral advance pricing agreements (APAs) through the OECD’s International Compliance Assurance Programme (ICAP). Readers can expect these stories and more to come.
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