Avoiding tax is not the answer

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Avoiding tax is not the answer

The author is the head of the industry 1 team of the JoongAng Ilbo.

This summer, the first flood in 200 years killed more than 200 people in Germany and Benelux. The glacier in the Swiss Alps melted and formed a lake, causing a flood in residential areas. Last summer, the temperature dropped below freezing in the usually warm Texas, and snow and hail fell. The wildfire in the north caused by unusually high temperatures left the world bewildered.

The European Union and the United States presented a plan to introduce a carbon border tax to prevent global warming, the main culprit of climate disasters. In short, they want to impose a tax when countries with looser regulations on carbon emission than the EU and the United States export products to them.

The superficial reason for introducing the unfamiliar concept of a carbon border tax is to respond to climate change. The meteorological disasters and unusual temperatures around the world have made carbon neutrality a global task. But we cannot ignore that advanced countries want to secure additional tax revenue by imposing a new tariff with the excuse of climate change. The EU can get an additional 14 billion euros ($16.5 billion) in tax revenue by imposing a carbon border tax on steel, aluminum, fertilizer and cement from 2026. The United States also will have as much as $16 billion in additional tax revenue by imposing the carbon border tax from next year.

It is undeniable that the carbon border tax is a new trade barrier. The EU and U.S. preoccupy the topic of green economy and want to restore the manufacturing hegemony that has been passed on to emerging economies. Emerging economies, including Korea, have attained economic development by freely expanding into the markets of the developed world under the WTO system. But the EU and the U.S. want to restore their leverage in manufacturing and change the rules of the trade game by protecting local economies.

In the end, the carbon border tax the EU and the U.S. are considering is a threat to Korea, heavily relying on free trade. The Federation of Korean Industries sent a letter to the president of the European Commission, requesting that Korea be excluded from the application of the border tax. Exporting companies are in a desperate situation as they would have to pay 1.2 trillion won ($1 billion) a year in border taxes to export the current volume.

Carbon neutrality is not a task limited to companies and not something the government can attain by setting goals. Companies need to change their production systems to reduce carbon emission by turning to green energy. The government also should provide various incentives and long-term policy assistance, including a reconsideration of the nuclear phase-out policy.

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