Tax now for a possible future

By Michael Breen

When President Lee Myung-bak last weekend proposed a unification tax, he prompted debate about the core issue South Koreans now have with North Korea.

While the international community is absorbed by Pyongyang's nuclear weapons and appalling abuse of its own people, South Koreans are driven by worry over how much the endgame of reunification will cost them.

Historically, southern attitudes to the strategic imperative of recovering their severed nationhood can be understood in two periods: before the fall of the Berlin Wall when it seemed an unreachable fantasy and all were in favor, and after the wall, when the massive social and economic costs of unification turned most Koreans into ``gradualists” opting for slow and safe over rapid and risky unification.

That transformation led to the engagement policy of the two previous administrations. Although branded ``conservative” and a troublemaker in dealing with the North, Lee has in fact simply refined the idea of engagement by introducing a measure of reality. Let’s be prepared to engage but not waste our time if the other side doesn't really want to, he says.

In his Liberation Day speech on Sunday, he went one step further and articulated what until now had gone unspoken. National unity, he said, must be paid for by our taxes.

The day after the President’s speech, one of his advisory panels gave us an idea of the bill, announcing that the country would need $322 billion over 30 years in the case of a gradual and peaceful process and $2.14 trillion for the same period in the event of an abrupt regime collapse.

That translates into a contribution of $6,600 for each citizen for the peaceful option as against $44,000 for the sudden and possibly violent alternative.

These figures are new and, as with all estimates, we may assume the eventual amounts will be more. But let's go with them for now.

When viewed from this simplistic perspective of a total bill divided by the current population, two considerations emerge. First, anyone who wonders why it’s so hard to find people here, apart from North Korean defectors and their activist friends, who want the North to collapse and the South to absorb what remains, there’s your answer.

For any taxpaying citizen (who risks losing his job to a North Korean willing to work for less), gradualism is the only sensible way forward. That doesn’t mean that in hoping the dictatorship holds on for a lot longer, he doesn’t care about the suffering of North Koreans. But their liberation falls into the same box as cancer research, the homeless and children born with AIDS in Africa. He cannot impoverish his family for them.

But, second and conversely, when broken down, these figures are not unmanageable. I may baulk at giving away $44,000 in a one-off tax for each of my family members. But in terms of the increase in my monthly tax, peaceful unification will cost me $19 extra for each family member and collapse-and-absorption will cost me $122. I am willing to pay that.

Now this all makes for good debatable stuff if you’re interested in the subject, but let’s take a big step back from this discussion and get a clear picture of what we are saying here. First, we are talking about taking over another sovereign state. This is presumptuous, rude even.

Second, it is also a little foolish. North Korea today, like South Korea in the 1950s, is a mendicant state. It is not simply poor. Its government neglects the economy by choice, seeks international aid to fill the gaps, and then has the nerve to treat its benefactors as if they are lining up for the honor of donating. Surely the message to a people accustomed to this posture that the South is preparing itself to guarantee their future is the wrong one?

Put another way, a people raised to blame others for their own circumstances needs to learn to take responsibility for their nation's development, as South Koreans did in the 1960s. We shouldn't be giving them advanced warning that we’re going to pay for it. Rather, we should be saying that after unification, however it happens, we’re going to keep two separate states and northerners are going to have to work hard to build theirs up.

Then there is the reward-for-bad-behavior factor. If you do the math in reverse and divide the current population by the amount needed for re-unification, every North Korean will receive about $14,000 for peaceful national merger and around $90,000 if they collapse and are absorbed.

Another aspect of the whole issue is the viability of creating a tax to pay for an outcome that is only a possibility. Yes, re-unification has to happen. But what if it is a very long time coming?

Imagine if Park Chung-hee, the president in 1971 when the first North-South talks started, had imposed a unification tax back then. If we start paying now, do we get our money back if there’s been no reunification by the time we retire?

Michael Breen is an author, former foreign correspondent and the chairman of Insight Communications, a public relations consulting company. He can be reached at mike.breen@insightcomms.com.