Korea may raise duty-free allowance for travellers

Korea may raise duty-free allowance for travellers
A duty-free shop in Incheon International Airport in South Korea.

SEOUL, Korea - The Ministry of Strategy and Finance in Korea said Monday that it would consider increasing the personal duty-free tax allowance for travelers, in response to persistent calls from local businesses.

Last week, the Federation of Korean Industries vice president Lee Seung-cheol asked President Park Geun-hye to increase travelers' duty-free allowance from the current US$400 (S$508).

This allowance has remained unchanged since 1988, despite an almost fivefold increase in per-capita income from US$4,548 to US$22,708 during the same period, according to the Bank of Korea, the nation's central bank.

However, despite its announcement that it would consider raising the ceiling, the Finance Ministry appeared reluctant to do so.

"Our stance is that the tax allowance should not be increased, and this has yet to change," said a ministry official. "We will, of course, review the issue as a related request has officially been made to the presidential office, but nothing has been decided yet."

He added that when taking into account the special allowance for cigarettes, perfumes and liquor, the actual tax allowance for a traveler amounts to about US$1,000.

The ministry claims that an increasing the allowance too much may exacerbate the wealth inequality in Korea.

Despite the government's conservative view, economic organisations and political parties assert that the current duty-free limit is too low.

The Korea Institute of Public Finance Act said in a report in 2011 that the US$400 ceiling should be raised to US$600 to US$1,000, pointing out that Korea's tax allowance was one of the lowest among OECD states.

Rep. Shim Yoon-joe of the ruling Saenuri Party submitted a bill to revise the customs law, asking for the allowance to be doubled to US$800.

But the KIPFA report was rejected by the government, which said that the change would do little to improve the domestic economy and would only violate the principle of fair taxation. Shim's bill failed to pass the National Assembly's general meeting.

Because of the gap between consumer sentiment and the actual regulations, an increasing number of travelers are being caught and fined for exceeding the tax allowance amount.

In 2012, almost 4 out of 10 overseas travelers were found to have violated the rule, according to the Korea Customs Service.


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