Korea Herald | 17 September 2007
Korea-U.S. FTA to cut customs revenues by W860b annually
By Choi He-suk
The free trade agreement between Korea and the United States would reduce the Korean government's customs-related tax revenues by an estimated 860 billion won ($925 million) annually for 10 years after the pact is implemented, the National Assembly's Finance and Economy Committee said yesterday.
The committee's report, based on data released by the Korea Institute of Public Finance, showed that the trade pact will reduce custom tax revenues by 665 billion won annually during the first five years after the agreement is implemented. In addition, rate changes for various taxes, including the education and the value added tax, and the special tax for rural development will bring a 65 billion won reduction in the government's annual tax revenues during the period.
The committee said that the trade pact's impact on tax revenues will increase during the second half of the 10-year period. According to the report the annual tax revenues generated through customs will be reduced by 912 billion won and domestic taxes will fall by 83 billion won during the period.
However, the KIPF data also showed that if the Korea Institute for International Economic Policy's forecast that the trade pact will have the effect of increasing the country's gross domestic product by 0.32 to 6 percentage points, the Korea-U.S. FTA will have the affect of increasing the country's overall tax revenues. According to the KIPF, given that the GDP grows at the maximum rate of 6 percentage points, the Korean government's annual tax revenues will be increased by 1.6 trillion won in the next 5 years, and by 12 trillion won in the five-year period following.
