North Korea has unilaterally imposed hefty taxes on South Korean firms operating in the joint Gaeseong inter-Korean industrial complex in the North while employees there are demanding the firms provide more severance pay, a Seoul government official said Thursday.
“The North imposed the taxes including corporate income and business taxes on some of the companies operating in the Gaeseong complex in accordance with a new tax enforcement regulation
(enacted) and delivered by the North last August,” the official said.
The imposed taxes were unilaterally drawn based on the North’s estimation of business activities by the South Korean firms, according to the official. About 10-20 firms out of the total 123 South Korean firms operating in the complex located in the North Korean border city of Gaeseong were reportedly slapped with the heavy taxes.
The amount of taxes imposed and whether the firms paid them are not clearly known, but some of the companies are said to have paid the taxes amid increasing pressure from the North.
The North unilaterally issued the new tax regulations in August, which also allow the country to levy heavy fines if a South Korean firm is found to have accounting irregularities. The regulations allow fines as heavy as 200 times the amount involved in potential accounting fraud by South Korean firms.
As part of efforts to extract taxes, the North is reportedly threatening a ban on the movement of goods and people in and out of the complex if the taxes are not paid, other sources said.
South Korean firms there are protesting the levies, saying “they may thwart normal corporate activities,” but the North may not budge on the decision, they said.
In addition, North Korean employees at the Gaeseong complex are demanding that South Korean firms provide severance pay even if employees voluntarily quit.
Under the current labor terms in Gaeseong, South Korean firms are required to offer severance pay only when North Korean employees are involuntarily laid off after at least one full year of employment.
As of end-August, a total of 52,881 North Korean workers were employed by South Korean firms operating in the Gaeseong industrial complex. About 500 to 1,000 employees leave South Korean employers every year, citing health reasons or marriage. (Yonhap News)
