Monday, October 22, 2012

South Korea firms in Gaeseong complex hit by North Korean's hefty taxes

The inter-Korean relations is facing another threat of being put out because North Korea has arbitrarily and unilaterally slapped heavy taxes on South Korean firms operating there.
North Korea revised tax regulations in August for South Korean businesses operating in Kaesong to impose hefty fines on companies if caught dodging taxes.
As part of its effort to extract taxes, the rogue state is allegedly threatening to restrict the movement of goods and personnel in and out of the complex unless the taxes are paid. Moreover, North Korean employees at the complex also ask South korean firms to provide severance pay even if employees quit voluntarily. Under the current labor terms, South Korea firms are obliged to offer severance pay only when North Korean employees are forced to quit after serving at least one year.
According to the original regulations that were agreed in 2003 when both Koreas were working to open the complex, Pyongyang is required to negotiate with Seoul any changes to the relevant tax laws, but the North made the revisions arbitrarily without consulting the South.
The joint industrial complex in the North Korean border city of Gaeseong is the only pipeline linking the two Koreas due to their strained relations.
The North has threatened to either block their exports or evict them from the complex if they fail to pay up. North Korea must be dreaming if it thinks foreign companies will simply submit to such an arbitrary regime, let alone pour fresh investment into the country.
At the moment, North Korea and China are developing a joint industrial complex in Hwanggumpyong Island and Wihwa Island. Even if North Korea provides cheap labor, no country will invest in such an unstable nation. Even if North Korea is desperate for foreign currency, this has gone way too far out of the line.

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