It is time to raise duty-free purchase limit for Korean nationals

Incoming visitors to Korea can make a purchase as the Arrivals Hall of Incheon International Airport starting from late May. This leads to a rising need for increasing the limit on duty-free purchase for Koreans given national income levels, inflation and limits applied at other international airports. The current purchase limit on duty-free products for Korean nationals stands at 600 dollars per person.

The duty-free purchase limit per Korean national increased from 100,000 won in 1979, to 300,000 won in 1988 and to 400 dollars in 1996. The current limit of 600 dollars (680,000 won) was set in 2014. Considering that the nominal GNI (gross national income) and prices have increased more than three-fold and 79 percent, respectively, it can be said that the limit on duty-free purchase has rather stayed unchanged or taken a backward step during the given period.

The limit amount for Korean nationals is way lower than those applied overseas. The maximum of 1,600 dollars or 1.82 million won is applied according to stay periods in the United States, while 200,000 yen or 2.03 million won and 5,000 renminbi or 849,000 won are set as the limit on duty-free products for Japanese and Chinese nationals, respectively. Furthermore, Hong Kong, Singapore and other nations do not have any purchase limit. As the current purchase limit in Korea is far from being realistic, customs authorities tend to be less aggressive in inspection. Even a larger number of Korean citizens are not increasingly willing to declare their duty-free purchase at the airport, which only leads to concerns of them possibly committing tax avoidance.

It seems to be inevitable to run a duty-free shop at the Arrivals Hall and raise the duty-free purchase limit for Korean nationals as competition only gets fiercer among international airports. The Chinese government strives to encourage Chinese nationals traveling overseas, expected to rise over 200 million next year, to make a purchase at home. Two years ago, Hainan Island, one of China’s special economic zones, increased the duty-free purchase limit for nationals from 16,000 renminbi or 2.72 million won to 30,000 renminbi 5.09 million won. It has permitted in-city duty free purchase up to 180 days after arrival. Japan has also streamlined post-purchase measures while opening up a duty-free shop at the Arrival Halls at Narita and Haneda Airports to boost consumption during the 2020 Tokyo Olympic Games.

Some raise concerns over adverse effects of rises in the duty-free purchase limit such as outflows of foreign currencies, possible damage to relevant domestic industries and gaps between social classes. However, it is important to revisit the issue of raising the duty-free purchase limit at multiple angles regarding potential consumer conveniences and proper levels of the purchase limit in a time when the national income has reached 30,000 dollars. Meanwhile, the Korea Customs Service and other relevant authorities have voiced that the limit should adjust to 1,000 dollars. It is time to take detailed review to make a reasonable adjustment.