Golf ‘sin taxes’ called a barrier to tourism

There are about two million foreigners residing in Korea, and more than 14 million foreign tourists visit the country in a year. It is common for Koreans to run into foreigners in their ordinary lives, but it is rare for them to meet on golf courses.

One of the reasons is that tourism companies are reluctant to include golf course visits in their tour packages.

“It is just way too expensive, and we can’t even negotiate on the price since the portion of tax is too high,” said a senior employee at a local tourism company in Korea. “We do have some tour programs including golfing on Jeju Island, where the individual consumption tax is exempted, but there isn’t that much that we can do elsewhere.”

The tax exemption in Jeju will expire in 2018. The exemption was due to end last year, but the government decided to give 75 percent off until next year after backlash from residents in Jeju.

Tax is one of the biggest topics in golf course management. In Korea, there are three types of taxes levied on golf courses: acquisition tax, property tax and real estate tax. Private golf clubs have to pay heavy taxes for all three criteria as well.

Private golf clubs’ acquisition tax rate is 4 percent, which is 1,000 percent to 5,700 percent more than the rate for local courses, who are taxed between 0.07 percent and 0.4 percent. The rate for private golf courses is similar to that of gambling and high-end drinking bars.

“[Private] golf courses pay 2 billion won [$1.7 million] to 4 billion won as an acquisition tax a year regardless of how much they make,” said Park Jung-ho, CEO of the Korean Golf Course Business Association. “I don’t get why they have to pay heavy taxes as well.”

Park also complained that paying additional real estate tax on preserved land is unfair.

Golfers also have to pay 21,120 won in taxes every time they play golf. The individual consumption tax, which is 12,000 won, is the most expensive among them. The United States and China do not levy individual consumption taxes on golfers. Japan collects 8,500 won in taxes for golfers, but Prime Minister Abe Shinzo announced he would consider abolishing it.

It’s been about 50 years since the government started to collect high taxes on golf courses. Back then, the sport was seen as a luxury leisure that Koreans should not be addicted to. The individual consumption tax was introduced in 1961. Since then, individual consumption taxes on ski resorts have been removed, but golf courses, casinos and horse racing are still taxed. Among the three, golfing is taxed the highest - 200 percent more expensive than casinos for locals and 1,200 percent more than horse racetracks.

The government makes near 270 billion won through individual taxes on golf courses.

“The economic effect is expected to be near 1.56 trillion won by creating new jobs and boosting the local economy if the tax is abolished,” an industry insider said.

The average Korean will pay about 26,570 won less if the acquisition tax rate on golf courses is lowered from 4 percent to 2 percent, according to the Korean Academic Society of Taxation.

Industry insiders are arguing that golf fees can be lowered by some 50,000 won if the individual consumption tax is also removed. They emphasize that more people might be able to enjoy golfing for 100,000 won if the taxes are abolished.

Others disagree with the idea.

“It is very irresponsible for golf course operators to complain about the high tax since they chose to make private courses to finance their construction at first,” said Seo Chun-bum, director of the Korea Leisure Industry Institute. “The government introduced the individual consumption tax cut back in 2008 in order to boost consumption, but it only helped private golf courses to accumulate wealth.”

He added that they need to transform themselves into public courses.

“Giving benefits to just private courses would not be fair,” said Cho Gwang-min, a sports marketing and management professor at Yonsei University. “Private golf courses need to find their own ways to survive.”

The government’s stance on this issue is straightforward. The Ministry of Strategy and Finance and the Ministry of the Interior, who manage tax-related issues, have announced that they have no plans to reduce taxes.

On the other hand, some argue that the government needs to reconsider.

“There needs to be a discussion to lower tax burdens for private golf courses in order to make golf more popular in Korea,” said Chung Ji-sun, a professor who teaches tax-related subjects at the University of Seoul.

BY JANG WON-SEOK [kim.youngnam@joongang.co.kr]