Taxation in North Korea

Officially, there are no taxes in North Korea. The date of 1 April is the North Korean "Tax Abolition Day".[1] North Korean propaganda claims that North Korea is the world's only tax-free country.[1][2] The North Korean state, however, still collects revenue from its citizens in the form of hidden taxation through various sales taxes.[3] In particular, the turnover tax from consumption provides for the majority of the state revenue in North Korea.[4] The North Korean state does, therefore, collect revenues, which internationally has been compared to a taxation system, but inside North Korea the word tax is not used, and the term for state revenue has been variously translated as "Socialist Income Accounting", "Socialist Economic Management Income", and in similar fashion.[4][5]

Agricultural tax-in-kind introduced in the 1947 was abolished in North Korea in 1966, as the process of collectivization of North Korean agriculture ended.[3] Direct taxes, such as income tax, were officially eliminated in 1974 as "remnants of an antiquated society".[3][6] This action, however, did not have any significant effect on state revenue because the overwhelming proportion of government funds—an average of 98.1 percent during 1961–70—was from sales taxes such as turnover taxes, deductions from profits paid by state enterprises, and various user fees on machinery and equipment, irrigation facilities, television sets, water, and so on.[6] This is in line with similar practices in other socialist countries.[3][4]

Another form of tax in North Korea is periodic requirements for citizens to donate materials or work free of charge on government projects.[2]

Special taxation laws also affect the special economic zones in North Korea (in particular the Kaesong Industrial Complex) where foreign companies are allowed to operate. There is therefore corporate tax in North Korea, as outlined by the Processing Trade Law, Lock Gate Law and Copyright Law, and related legislation, including laws on tax evasion.[6] An estimate of this corporate tax in early 2000s was for 10-14%.[7] North Korean workers there are subject to the usual indirect taxation: their wages are paid in hard currencies by foreign companies to North Korean government, which then pays the workers in North Korean currency, minus the value of "insurance taxes and socio-cultural fees".[7] A 2013 estimate for the tax on individual workers suggested that the state takes 45% of their wages in a form of a tax.[8]

In 2016 it was reported that the North Korean government may be considering a reintroduction of taxation, including an income tax, though likely under another name than "taxation".[9]

References

  1. 1 2 Yoo Gwan Hee (2008). "Tax? What Tax? The North Korean Taxation Farce". DailyNK.
  2. 1 2 Stephan Haggard; Marcus Noland (2011). Witness to Transformation: Refugee Insights Into North Korea. Peterson Institute. p. 64. ISBN 978-0-88132-515-7.
  3. 1 2 3 4 Lee, Hy-Sang (2001). North Korea: A Strange Socialist Fortress. Greenwood Publishing Group. p. 70. ISBN 978-0-275-96917-2.
  4. 1 2 3 Lee (2001), p. 71.
  5. ↑ Seoul, Yonhap News Agency (2002-12-27). North Korea Handbook. M.E. Sharpe. pp. 229–230. ISBN 9780765635235.
  6. 1 2 3 "North Korea : a country study". The Library of Congress. pp. 152, 164–165.
  7. 1 2 Mark E. Manyin (18 October 2012). The Kaesong North-South Korean Industrial Complex. DIANE Publishing. pp. 11–12. ISBN 978-1-4379-8844-4.
  8. ↑ CNN, By Susannah Cullinane. "How does North Korea make its money? - CNN.com". CNN. Retrieved 2016-04-27.
  9. ↑ "Pyongyang considers reinstating its tax system". Retrieved 2016-04-25.
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