A duty-free duty

The limit for duty-free imports by travelers returning from overseas has been fixed at $400 per head for 25 years. The strict standard, determined when Korea’s per capita income was $4,548, doesn’t sit well with citizens these days when per capita income has increased to $22,708. Compared with other major economies, the limit leaves room for reconsideration given the $800 limit in the United States, $820 in China and $2,050 in Japan. Our limit is even lower than that of other OECD members at $720 on average. The low bar was criticized by lawmakers at their annual audit of the Korea Customs Service earlier this week, who argued that such a regulation could easily turn many honest-hearted citizens into lawbreakers.

Statistics tell us why. According to the customs agency’s examination of 480,000 passengers in 2010, 73 percent of them carried in goods that exceeded the $400 limit. The number of Korea’s overseas travelers is about 50 million annually. If 73 percent of those travelers are bringing in too much, nearly 40 million travelers violate the rule each year. Even if you exclude those who went on multiple overseas trips, almost 80 percent of our people don’t respect the limit. The number of overseas travelers who paid additional taxes for exceeding the limit has also risen to 46,450 as of September, a three-fold increase compared to the same period three years ago. The amount of duty squeezed out of them has also risen to 1.48 billion won ($1.39 million) - a five-fold increase - during the same period. The increase demands more administrative costs as more staff and time are needed to detect an increasing number of violators.

A call for adjusting the limit to the reality of our era was raised two years ago. In 2011, the Korea Institute of Public Finance came up with an analysis that the tax exemption limit needed to be raised to a range between $600 and $1,000, yet it concluded that it would be better to keep the standard intact considering the harsh economic situation after the 2008 global financial crisis. It also considered the possible criticism that raising the limit would merely fuel luxury shopping by the rich and also be a tax reduction strictly for the upper class.

But that’s not true. The ancient limit doesn’t reflect our people’s increased purchasing power and higher living standards. The Ministry of Strategy and Finance said it’s difficult to lift the ceiling if it’s incompatible with the public’s sentiments. But it is not right to force people to follow an unreasonable guideline. If parents forced their grown-up offspring to wear baby clothes, who would approve? It’s time for the government to raise the limit.