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Time to scrap or at least cut the weird tax

Published: 08 Jan. 2024, 19:56

The government has decided to colossally change the way it has been collecting a strange tax that amounts to 24 trillion won ($18.2 billion) annually. The tax was introduced in 1961 to finance specific public programs by imposing an extra tax on consumers and producers. The Ministry of Economy and Finance on Monday announced a plan to review the weird tax on 91 items from the bottom up and find effective ways to ease the burden so that taxpayers can feel the change.

The tax in question has been levied on a number of items even without our recognition — from the 3 percent tax on movie tickets to the 840-won tax on every pack of cigarettes to “improve public heath” and to another tax on chewing gum to “improve our environment.” The government is supposed to collect 24.6 trillion won this year, tripling from 7.4 trillion won in 2002.

Civic groups and business lobby groups have raised issue with the “stealthy” tax that can be collected at the government’s discretion and without legislative approval. In the meantime, the odd tax became a useful means for the government to fund any new programs, because the revenue from the tax is treated as a special account.

As the tax was not officially defined as a “tax,” public resistance was not that strong. And yet, citizens and companies perceived it as an extra tax. It could help dampen corporate investment and reduce domestic consumption in times like these.

After the implementation of a law designed to prevent additions of new taxes since 2002, the government abolished some of the unusual tax every three years if their feasibility is low. Nevertheless, the scrapping of the tax was minimal. It was still imposed on 67 of the 91 items last year, according to a recent survey by the Korea Chamber of Commerce & Industry.

Under the circumstance where the fiscal deficit grows due to tax revenue shortages, the government would stick with the peculiar tax. Local governments also opposed the removal of the tax. But the time has come to abolish any unnecessary taxes to help revitalize the slowing economy first in spite of its “sublime” goal of preparing funds for public projects and supporting the vulnerable class. If such a tax is really needed, the government must establish a different — and reasonable — taxation system after convincing the people of the need.

It is not appropriate for the government to maintain the shady tax to compensate the losses in tax revenue. It can put the lid on the total amount of the bizarre tax rather than blindly raising it or increasing its items.