Collecting Taxes in the Country of No Taxation
A propaganda poster of the DPRK reads, “With our best communist virtue and customs!” Image via North Korea’s KCNA.
Back in June 2018, after watching news of the summit between Kim Jong Un and then-US President Donald J. Trump on TV, a friend in my hometown had a quirky suggestion.
“Trump should come here and tell the North Korean people how to avoid taxes,” she told me on the phone.
She was struggling as a jangmadang market trader over the various taxes she had to pay. As far as she was concerned, the first-ever meeting between the top leaders of North Korea and America was less important than the burning question of how to save on taxes.
In South Korea, people are familiar with news stories about Trump and his personal tax issue. He’s well-known as a “tax saver.” When I read that he paid just $750 in federal income taxes in 2016, I was so confused that I thought I was suffering from dyslexia. My income taxes were four times higher than his and yet he was earning a million times more than me. I must say I was kind of impressed.
There’s an old saying in Korea that says, “A man who has nine envies a man who has one.” In other words, the more you have, the greedier you become. From the Korean perspective, Trump is the “greedy man with nine.”
It’s obvious that the more money you make, the more you should pay in taxes. But it’s also true that tax payment can feel like a waste of the time and energy that went into earning the income. You might feel like your hard-earned money is just disappearing out of your pocket.
Such feelings aside, it is of course important to fulfill your tax obligations. I say this not because I’m a law-abiding person. The reason is simple: I think a capitalist society is a better place to live than North Korea and worth supporting.
My favorite theme in capitalism is the recognition of private ownership. Taxes are paid in exchange for free will and ownership, which are human rights. That is as valuable as taxes to me now because I lived without even realizing the existence of the words “human rights” for more than 20 years. This is why I keep reminding myself about “the recognition of private ownership” whenever I feel like taxes are a waste.
North Korea doesn’t believe in taxation, at least not officially. It promotes itself as the only country in the world where citizens are not required to pay any types of taxes. It even has a national tax abolition day. There used to be taxation but it ended on April 1, 1974, with the adoption of a law by the Supreme People’s Assembly “on the complete elimination of the tax system.”
However, despite this official posture, there is in fact a system of taxation. The authorities have expanded it as the economic situation has worsened.
For example, a woman must pay a “market usage fee” (jangse) to be able to sell goods in the jangmadang market. The jangse fees collected from the women responsible for the economic activities for their households amounted to $56.8 million in 2018. Defectors say that they believe the annual figure has since increased. The jangse fee is not calculated as a percentage of earnings. Even people who make no money have to pay it. There is even a story of a North Korean woman who committed suicide because of the market fee burden. The problem is that everyone, including workers and housewives, must pay the same amount, regardless of their income or economic capability.
The regime taxes the people in a variety of other ways. Since Kim Jong Un took power, the authorities have been securing their budgets by including a “personal income payment” levied on individuals in a “miscellaneous revenues” category. They also tax electricity, land, and real estate. The government has also raised land use fees.
The state collects products from the people in a form of indirect taxation. These include cement and reinforced steel bars collected in the name of “socialist construction support.” Loyalty and support funds are collected through the local inminban (neighborhood unit). School students of all ages are required bring rabbit skins, scrap metal, silver, copper, scratch paper and other items for use by the state.
A recent new type of tax is being informally called the “corruption price.” This slang term refers to a fee paid by individual business owners to those in power in exchange for monopolizing the market. A defector who used to rent a public enterprise building and run a table tennis center in Pyongyang said he paid $300 to the enterprise every month. “I started a pool hall to make a living, but I was just sacrificing myself for others” he said, joking that he was unwittingly loyal to Kim Jong Un with his taxes.
As these examples show, tax in North Korea is arbitrary. Right now, taxes from the market and fees paid by traders account for the largest portion. Women are at the center of this.
As my friend the market trader told me, Kim Jong Un is the biggest beneficiary of the jangmadang market economy, and the biggest enemy of the women who work there are the taxes and the jangse market fee they have to pay for the privilege.
Jia defected from North Korea in search of basic freedoms, including the right to travel and freely express herself. Her identity as a North Korean has given her a sense of responsibility to represent the voices of her family and hometown friends and is also the reason she has chosen to work as a journalist.
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