North Korea doubles de facto sales tax levied on distributors in some areas

Scene from inside Rajin Market taken in November 2018
Scene from inside Rajin Market taken in November 2018. Image: Daily NK

Sales fees levied on private distributors have risen in some areas of North Korea. The fees are managed by North Korea’s collection agency and essentially provide a source of tax revenue for the state. Private distributors are expressing discontent over the changes as many are suffering under the country’s already poor economic conditions.

“The authorities recently began demanding outrageous and unfair selling fees from private distributors,” said a South Pyongan Province-based source on April 25. “Collection offices (i.e. tax offices) attached to local people’s committees are required to pay varying fees depending on the product, and the number of fees have been doubled.”

These de facto tax offices were established in each city and county as part of the July 1 Economic Management Improvement Measure in 2003 and are managed by the Ministry of Financial Administration. The offices collect fees for land use, market stalls, and various other reasons.

“The authorities are demanding a huge amount of fees to gain control over and restrict the activities of private business people who live in Pyongsong but bring in products from Sinuiju, Rajin-Sonbong, Nampo and Hyesan,” said a separate source in South Pyongan Province.

“Soybean oil sellers, for example, had to pay 3% of their income before, but now have to pay twice that amount.”

The skyrocketing fees are likely due to the fall in tax revenue arising from the economic difficulties the country is facing.

“The government increased the fees they were collecting just as incomes fell among private business people,” she said. “The authorities are simply taking money from the people to make it seem like the state is self-sufficient.”

North Korean authorities have made the fee system more sophisticated while raising fees as part of efforts to generate more income for the regime.

The North Korean Supreme People’s Assembly (SPA) proclaimed a law in 1974 that “completely eliminated the tax system” under the pretext that taxes are a form of exploitation.

In reality, however, the state has broadly taxed many areas of the economy, including agricultural harvests, and the use of stalls in markets, while levying holding fees for luggage, bicycle renting fees, and electricity fees.

It is not clear, however, whether the rise in fees as reported by the Daily NK source applies to merchants and agencies involved in business, or whether the fees are being collected in other areas of the country.

North Korean distributors facing the increase in taxes, however, are suffering from falls in trade due to international sanctions and reduced consumer spending due to the country’s economic troubles.

According to the United Nations agency Comtrade, North Korea’s trade with China fell by 51.4% in 2018 compared to the same period last year, equaling around 24.3 billion USD.

Recent reports from Pyongyang and other parts of the country suggest that private businesses are facing considerable difficulties.

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