Democratic Party members on opposite sides of the world could be set to push for crypto regulatory change – but while in South Korea, crypto communities could see their crypto tax threshold raised, in the USA, politicians want to wring several billion dollars out of crypto holders.
American lawmakers from the ruling party have launched a legal bid to close crypto loopholes that they believe allow traders to write off losses by selling tokens at lower prices, but then buying the same type of coin again within the next 30 days. They also want to make sure that people who buy offsetting positions also file capital gains declarations.
The bid was detailed in a proposal from Congress’ Ways and Means Committee, a body that is chaired by the Democratic member Richard Neal.
Per calculations made by the Washington Post, the government could stand to fill its coffers with around USD 16bn in tax revenue if the move is adopted.
The proposal’s authors wrote that current rules “prevent taxpayers from locking in investment gains without realizing taxable gain,” and wrote of the need to “include digital assets” in the so-called “wash sale rule,” an “anti-abuse rule previously applicable to stock and other securities.”
The Ways and Means Committee authors wrote:
“The wash sale rule prevents taxpayers from claiming tax losses while retaining an interest in the loss asset.”
The authors noted that they hoped the changes would apply to “taxable years beginning after December 31, 2021.”
Shehan Chandrasekera, the co-founder and Head of Tax Strategy at Coin Tracker, remarked that the committee was trying to “close down a big crypto tax loophole.”
On Reddit, some were stoical, with commenters stating that they “knew” the loophole was “going to come to an end soon.”
Another noted that it was a sign that politicians were now “treating crypto like stocks.”
One optimist wrote:
“If stock is market rules get applied to crypto we’re going to the Moon. It’s probably the best possible outcome for the industry.”
In South Korea, however, there are signs that the Democratic Party could make a late sea change – as reports stated its crypto task force was mulling making changes to forthcoming crypto tax rules.
As previously reported, traders are facing capital gains tax rates of 20% on all crypto earnings over around USD 2,100 per year as of January 2022. But many have called the new tax rule “unfair,” as stock traders’ thresholds are several times higher.
Existing tax law means that stock traders must pay a similar capital gains tax of 20% if their annual gains exceed USD 42,000, providing they are investing in KOSDAQ-listed companies.
The incoming crypto tax law has been blamed for a dip in the Democratic Party’s performance in opinion polls ahead of next March’s presidential elections.
News1 reported that the task force had held a meeting on the matter and said it would “discuss ways to promote cryptoasset institutionalization.”
It also noted that the ruling party “agreed that it is necessary to re-discuss the matter of capital gains tax” in the crypto sector, claiming that the matter was still “open.”
Task force members concluded by adding that they would seek the government’s opinion and update the public thereafter.