Little enthusiasm for Lee’s unification tax proposal

President Lee Myung-bak’s proposal for a unification tax has been met with questions about its intention and efficacy, creating new controversy in inter-Korean relations already heightened after the Cheonan incident.

Some ruling Grand National Party members criticized the timing of the announcement, saying the decision was made too hurriedly, without taking into consideration the opinions of party members.

Opposition Democratic Party members were skeptical as well.

“If the government does have a goal in regard to unification, it should prioritize lowering the cost of unification by resuming inter-Korean exchange, before talking about a ‘unification tax,’” Chung Dong-young, a lawmaker from the major opposition Democratic Party who was Unification Minister during the Roh Moo-hyun administration, said in a statement released yesterday. “Unification does not come on its own.”

In a speech Sunday marking the 65th anniversary of Korea’s liberation from Japan’s colonial rule, Lee said that Korea needs to start thinking about the adoption of a unification tax as a way to prepare for unification, the first such proposal made by the conservative president. He did not elaborate on the specific methodology or timetable.

The opposition claimed that the Lee administration is passing the financial burden for the unification onto the general public.

Some called it an “anti-unification tax,” saying that the proposal was unclear as to how the two Koreas would be united and that it could trigger unnecessary tension with North Korea, given the status of current inter-Korean relations.

The two Koreas remain at odds over the sinking of the South Korean warship Cheonan, which left 46 South Korean sailors dead in a torpedo attack in March. Seoul and Washington started another joint military drill yesterday amid strong protests from the North.

“It leaves a lot of room to be interpreted as an idea for unification by absorption, which would provoke North Korea,” said Park Jie-won, floor leader of the DP.

In December 2005, Byeon Yang-kyun, budget minister during the Roh administration, mentioned the cost of unification, saying the financial burden for the South would be unbearably high. That drew a harsh response from the North.

“It is a remark revealing an impure motive on the part of Nam Chosun [South Korea] authorities who see unification by absorption as an established fact,” North Korea’s Committee for the Peaceful Reunification of the Fatherland said at the time in a statement.

The North has yet to show any response to Lee’s unification tax proposal, but analysts said North Korea will likely react negatively.

“North Korea has avoided mention of unification costs thus far because it could threaten a regime change,” said Kim Yong-hyeon, a professor at Dongguk University.

Some doubt the necessity of creating a tax on top of the inter-Korean cooperation fund.

The state-managed fund, created in 1991, had a remaining unspent total of 1.01 trillion won ($851 million) as of the end of last year.

“We will watch whether [the tax proposal] is a trick to overcome the government’s declining fiscal condition,” said Park Sun-young, a spokeswoman for the conservative Liberty Forward Party.

Some GNP leaders, including Ko Heung-kil, the party’s policy committee head, were dissatisfied with what they said was a lack of dialogue between the government and the ruling party.

The Blue House defended the proposal, saying it did not come “out of the blue.”

“There have been some talks both at the National Assembly and the government about the necessity of fiscal preparation for unification,” Kim Hee-jung, the spokeswoman for the Blue House, said at a media briefing. “And [the proposed unification tax] is to show that the government takes an interest in the issue and hopes to open a stage for discussion.”

Kim said there was a “serious” discussion about including the proposal in last year’s Liberation Day presidential celebratory speech.

Meanwhile, research by the Korea Development Institute - commissioned by the Presidential Council for National Future and Vision - showed yesterday that North Korea’s collapse could increase the unification cost seven times as opposed to a peaceful, gradual unification.

The KDI analysis showed that South Korea would spend $10 billion annually for 30 years between 2011 and 2040 if unification were to proceed peacefully, but it would spend $72 billion annually if the North were to collapse.

North Korea’s gross domestic product was $24.8 billion in 2008, only 2.7 percent of the South Korea’s.

By Moon Gwang-lip [joe@joongang.co.kr]