By Do Je-hae
The ruling Saenuri Party said Wednesday that it is considering proposing measures to hike license fees for duty-free shops.
The proposal has raised speculation that the party is targeting Lotte, the country’s fifth largest conglomerate.
“Most of Lotte’s profits come from their duty free operations,” Rep. Kim Jung-hoon, the head of the party’s policy committee, said. “But what they are paying in license fees is too low when compared to the gains from its duty-free businesses.”
Lotte operates seven duty free shops domestically, three in Seoul and one on Jeju and in Busan. It also has one shop at Incheon International Airport and Gimpo Airport.
Last year, Lotte duty free shop sales recorded 3.9 trillion won, accounting for 50.1 percent of domestic market share. Including sales from shops at the Indonesia Jakarta Airport, Singapore Changi Airport, Guam airport that Japan Kansai Airport, the combined sales mount to 4.3 trillion won. Lotte is the first domestic duty operator to achieve over 4 trillion won in sales.
“We are not directly aiming at Lotte,” Kim added. “The current economic situation is difficult, so it would be desirable for conglomerates or Chaebol to take part in easing the economic strain by sharing their key benefits.”
Lotte, the country's fifth-largest conglomerate, has been mired in a family feud between founder Shin Kyuk-ho and his two sons, Dong-joo and Dong-bin. The family squabble sparked nationwide criticism, pushing Dong-bin to apologize and make pledges to bolster the group's transparency.
Currently, the duty free operators are required to pay 0.05 percent of their earnings in license fees. Last year, about 40 billion won were paid in these fees, while domestic duty free sales recorded 8.3 trillion won.
The ruling party will use higher tax returns from duty free operations to boost the nation’s tourism, Kim said.
“For duty-free operators, a certain level of profits is guaranteed. The state should restitute some of the profits and use it for policy initiatives.”
He said that the growth of duty free shops contributes to national image and the central and local government's tourism-boosting efforts.
Incheon International Airport is the world’s second largest duty free and travel retail location with annual sales surpassing $1 billion.