Container tax survives for another 10 years?

It was recently released that container taxes will be prolonged by ten years more in the Port of Pusan.

Pusan City hall tried to change the mother law of the tax, the foundation of the container tax, and presented it to the public.

This revised bill allows the container tax to be levied for ten more years. The City of Pusan introduced the tax to build highways in hinterlands during the period from January 1, 1992 to December 31, 2001. If this law is passed in Pusan city council, the City of Pusan can levy the container tax, 20,000 won per TEU (Twenty-foot Equivalent Unit) up to the end of 2011. Pusan city hall said, "The container tax law will expire as of the end of this year, so a bill to extend the tax for ten more years is being submitted to the City council."

Pusan has collected around 570 billion won under the container tax bill over the last ten years. The money has not yet met goals to build 10 highways in hinterlands, equivalent to 77.15 km. Only 20.6 km in 4 highways has been built so far. One trillion won is required to build the remaining roads. Pusan City council announced, "During the last ten years we only collected 570 billion won. We still need 1 trillion won more to finish the remainder of the highways. As it is impossible to obtain more money from the government, it is inevitable that we will have to collect more money from container taxes."

If the law goes through, Pusan will likely rake in an additional 600-700 billion won by 2011.

It, however, looks uncertain as to whether Pusan will be able to change the law so easily. Some government ministries, including the Ministry of Commerce, Industry and Energy (MOCIE), were strongly vocal about revising the Local Tax Law, which is viewed as superior to the Pusan container tax law. MOCIE and the Korea Shipper's Association pointed out that Pusan is the last amongst global container ports to charge container taxes, causing heavily increased logistic costs and blocked export revitalization. The container tax should have been repealed, said the ministry.

In response, Pusan listed the reasons why the container tax has to exist. First, most overseas ports are operated by port authority systems, managing port incomes and building their own port facilities. However, Port of Pusan has given all of its port income to the local government, leaving nothing for itself. Secondly, high logistic costs are usually the result of road transportation, by nearly 90%, not by the container tax. The container tax is only responsible for 0.7-0.8% of total logistic costs, the ministry insisted.

Especially, if the container tax is abolished, it will probably prevent container hinterland highways from being constructed, causing additional logistic costs of 150 billion won. Container transportation through downtown Pusan also causes traffic jams, or in other more directly relevant terms, 1.99 trillion won in losses annually. When a container truck also passes through, it causes as much stress and wear on the road as 70,000 cars do. The container tax could be used to compensate the city for these port related expenses.

Pusan pointed out that the container tax has to be extended until 2011 when the Pusan New Port roads will be completed.

A Pusan official said, "Even though Kwangyang hinterland roads were fully funded by the government, only 28.7% of total construction costs for Pusan development comes from government coffers. So it is necessary to collect the container tax for Pusan to secure stable funds for port facilities."

The Pusan regional government said, "After hearing public opinions, we will pass this issue to Pusan City council. And if it passes, it will be enacted from January 1st next year."