[천광암 칼럼]Land tax, carbon tax, windfall tax… Lee Jae-myeong, who knows taxes too easily, the Democratic Party

Lee Jae-myung, leader of the Democratic Party of Korea, mentioned the ‘surprise tax’ as a solution to the heating bill problem. On the 25th, at the Supreme Council of the Democratic Party, Representative Lee first mentioned the plan to levy levies on oil refineries using the current system, and then said, “We need to review the introduction of the random tax system that countries have others created. and is implemented. Some Democratic legislators have even introduced the bill to the National Assembly.

First of all, President Lee’s words, “a random tax that other countries have created and implemented,” are not true. There is no random site in the US, China, or Japan. The random tax is mainly introduced or discussed in Europe, which was most affected by the Russian invasion of Ukraine.

The UK is particularly dominant, but the environment itself is quite different to Korea. The UK is an oil producing country that produces Brent crude, one of the three main types of oil in the world. He also leads several global oil majors such as BP, Shell, and Harbor Energy, which are active around the world. The windfall tax is a tax levied on the excess profits these companies make by extracting crude oil and gas from oil fields in the North Sea.

Unlike the UK, there are no ‘oil companies’ in Korea that produce crude oil with their own oil fields. Only ‘oil refineries’ refine 100% imported crude oil and sell it in the form of petroleum products such as gasoline, diesel, and jet fuel. This oil refining business is far from a bonanza or windfall. It is necessary to bear the risk of fluctuations in crude oil prices and make huge investments in facilities and technology. That is why Britain does not impose a random tax on profits earned through the oil refining business or through the retailing of petroleum products.

Another thing that Chairman Lee and the Democratic Party should not ignore is the fact that the oil refining industry is Korea’s main export industry. Exports of petroleum products by domestic oil companies last year totaled 57 billion dollars, ranking second after semiconductors among all items. 60% of Korean refiners’ sales come from exports. To achieve such international competitiveness, investment in facilities, technology development, and marketing efforts risked life and death.

If the state collects operating profits generated through normal corporate activities by labeling them as “random sites,” investment and employment will shrink and competitiveness will inevitably fall. In fact, as random sites have intensified since the start of this year in the UK, related companies are coming up with plans to reduce investment and employment one after the other. The Korean export industry is already in a situation where it is difficult to see the future due to the sluggishness of the semiconductors, which are the leading players. In such a yard, even the oil refining industry cannot be associated with ‘tax bombs’.

subscribe

The random tax belongs to the ‘bad’ tax even if you look at the principle of taxation. There is a lack of clarity and predictability. International Monetary Fund (IMF) Finance Director Vitor Gaspar, who previously served as Portugal’s finance minister, pointed out that it was a “problematic idea that harms the stability of the tax system” in relation to the EU’s discussion on introducing a tax on random

Fairness is also an issue. What is the basis for oil refining but not for semiconductors, automobiles, and defense industries? Are heating bills a problem? Then, the correct ‘house number’ is not the refinery, but the Korea District Heating Corporation. As demand for oil plunged following the Corona 19 2020 pandemic, the price of crude oil in the futures market at one point fell to minus $37.63 per barrel. Crude oil had to be sold for money, not for money. During the first half of that year, Korean oil refineries also suffered losses of about 5 trillion won. If a similar situation arises in the future, will the government step in and help save it? What about semiconductors? what about the car? what about steel?

In the last presidential election, Lee raised the first national land ownership tax as a way to fund basic income. However, when public opinion was not strong, the carbon tax was proposed as an alternative. The idea was to collect half of the annual corporate tax from companies, or an amount equal to the total. If this happens, Korean companies will pay corporate tax twice. At least, they tolerate this and that and push all the companies staying in Korea to pack their bags and leave.

The land holding tax, the carbon tax and the tax on random sites have the same ‘story line’. First, the villain is drawn. Landowners who are blind to speculation in the national land ownership tax, companies that destroy the environment in the carbon tax, and companies that are greedy for excessive profits in the random tax appear as villains. At the same time, politics wraps itself up as Robin Hood representing the weak. However, it has been a long time since our people were fed up with the banal ‘Robin Hood Story’. It is best to end the discussion about tax on windfalls at this point. Gone are the days of political ‘unexpected’ beating corporations.

Cheon Kwang-am Weekly Editorial iam@donga.com