Gov’t aims to make unification tax reality

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Gov’t aims to make unification tax reality

The government wants to push ahead with plans for a unification tax, possibly by increasing the value-added tax, while sounding out public opinion on the issue.

The tax, which was first proposed in a Liberation Day speech by President Lee Myung-bak last month, is supposed to prepare South Korea for the costs of eventual unification with North Korea.

The National Unification Advisory Council voted unanimously to support the idea at a meeting yesterday.

“We will actively develop nationwide discussions about the expenses of reunifying South and North Korea,” the council said in its statement.

The council also released a report on ways to raise funds for unification.

The report said the public might support an increase in the VAT, “which at 10 percent, falls short of the OECD average of 17 percent.”

The council estimated that with “an increase of just 2 percent in the VAT, the South Korean government’s expected income from the value-added tax - which may reach 48.7 trillion won [$41.3 billion] this year - could increase by 10 trillion won a year.”

The report also suggested that a private bank or a state-run company could be founded to use the tax money to help develop North Korea.

The Council acknowledged the possibility of negative sentiment from the public - especially among those in lower-income brackets - and resistance to the tax.

“Investing in North Korea can only result in profit,” the council said yesterday.

The council added: “The expense of unification can be greatly diminished if it is done after North Korea reaches a level of economic development by opening its doors and innovating, or if policies are implemented to help the North Korean side thrive on its own after unification.”

Public discussions on peaceful unification will be held today to Sept. 16 in various cities to gather public opinion on the proposals. The council plans to submit an overall report on the proposed tax to Lee on Nov. 24.


By Christine Kim [christine.kim@joongang.co.kr]

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