Tax laws North Korea
North Korea officially abolished direct taxes, including income tax, in 1974, declaring itself the world's only tax-free country. However, the government continues to generate revenue through various indirect methods that function similarly to taxation.
1. Indirect Revenue Collection:
Sales Taxes: The majority of state revenue is derived from sales taxes, particularly turnover taxes on consumption. These taxes are integrated into the prices of goods and services, making them a significant source of income for the government.
Enterprise Contributions: State-owned enterprises contribute to government revenue through payments based on their profits. This system operates akin to corporate taxation, with rates varying depending on profitability.
User Fees: Citizens pay fees for the use of public services and infrastructure, such as machinery, equipment, irrigation facilities, television sets, and water. These fees supplement government income and are considered a form of indirect taxation.
2. Special Economic Zones:
- Kaesong Industrial Region: In areas like the Kaesong Industrial Region, where foreign companies operate, North Korea imposes specific taxes on businesses. These include corporate taxes outlined in laws such as the Processing Trade Law and the Lock Gate Law. Additionally, workers' wages are subject to deductions for insurance taxes and socio-cultural fees.
3. Social Contributions:
- Labor Contributions: Citizens are periodically required to donate materials or provide free labor for government projects. While not formal taxes, these contributions are mandated by the state and are integral to the country's revenue system.
4. Terminology and Perception:
- "Tax Abolition Day": North Korea observes April 1st as "Tax Abolition Day," celebrating the official elimination of direct taxes. Despite the absence of formal taxation, the government employs alternative revenue mechanisms that function similarly to taxes.
5. International Observations:
- Comparative Analysis: While North Korea does not use the term "tax," international observers note that the government's revenue practices resemble taxation systems found elsewhere. The reliance on sales taxes, enterprise contributions, and user fees aligns with common fiscal strategies used globally.
Note: Information about North Korea's taxation and revenue systems is limited due to the country's closed nature. The details provided are based on available reports and may not fully encompass the current practices. For the most accurate and up-to-date information, consulting official North Korean sources or international organizations specializing in North Korean affairs is recommended.
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