Go to contents

Quasi-tax charges of 22 trillion won should be boldly revamped

Quasi-tax charges of 22 trillion won should be boldly revamped

Posted August. 24, 2023 08:40,   

Updated August. 24, 2023 08:40


Charges applied to cigarettes or electricity bills are not taxes, but companies and individuals have to pay them like taxes. South Korean people paid 22.4 trillion won last year in such charges of 90 types, which is one trillion won higher than the previous year. The initial purpose of applying such charges was to raise funds for certain public services. However, they have become quasi-taxes, misaligned with their initial purpose over time.

The biggest share came from charges for national health promotion, where 840 won is charged per pack of cigarettes to cigarette manufacturers, at 2,825 billion won. The charge was first introduced in 1995 to promote people's health through anti-smoking education, etc. While the annual charges increased by 188 times in 28 years, most are used for completely different purposes, such as responses to infectious diseases and low birth rates.

The electric power industry basis fund, which is a 3.7-percent surcharge applied by the Korea Electric Power Corporation to electricity bills, is collected two trillion won more per year than the actual expenses. As electricity becomes more expensive, the charge is increasing at the same pace. Unlike the promise to expand the industrial basis in preparation for the privatization of the power business when it was initially introduced in 2001, the charges collected are used to conduct new renewable energy business and build the Korea Institute of Energy Technology.

The Korea Chamber of Commerce and Industry recently pointed out that such legal charges with less legitimacy should be abolished, and excessive charging rates should be adjusted based on economic and societal changes. The organization criticized the excessive three-fold increase in annual charges during the last 20 years from 7.4 billion won in 2002 to the amount last year. This is the result of previous governments raising these charges instead of taxes, which face less social opposition.

Regardless of whether they are charges or taxes when collected in excessive amounts, they reduce the disposable income of households, causing less consumption and less investment by companies. Much money is wasted for unrelated purposes as the government and political circles change original purposes. In addition, three-percent charges applied to the general public’s movie theater tickets and international departure fees paid by people traveling overseas are criticized for being misaligned with the basic principle of surcharges, which is that they are applied to businesses for certain public services.

The growth rate of South Korea is expected to fall to around 1.5 percent. Some say that a further decrease can be experienced due to constricted consumption and unfavorable conditions in China. The government and political circles are easily tempted to charge quasi-taxes to use them for various purposes when the financial deficit grows due to fewer taxes. In order to prevent such an unfortunate situation, the quasi-tax charge system that is misaligned with its original intention should be overhauled to reduce the private sector’s burden.