The levy, often referred to as the “shadow tax,” is anticipated to decrease next year due to the government’s recent efforts to reduce various charges, such as the Electricity Industry Infrastructure Fund and departure payments, through revisions to the enforcement ordinance. While this reduction aims to ease the financial burden on the public, it poses significant challenges in areas that require substantial funding, particularly in critical infrastructure projects like electricity grid investments. This comes at a time when tax revenues are already sluggish due to tax cuts and a weakening economy.
According to the “2025 Comprehensive Plan for Charge Management,” submitted by the Ministry of Strategy and Finance to the National Assembly on the 3rd, the total levies collected next year are expected to amount to 23.1866 trillion won—a 5.8% decline from this year’s projected 24.6157 trillion won. If this target is met, it would mark the first annual decrease in levy collections in five years, since the 1.2% drop in 2020.
In March of this year, the government announced plans to abolish or reduce certain levies to alleviate the financial strain on the public. Levies, distinct from taxes, are financial obligations imposed by public entities like the government for specific public works projects.
The levy rate for the Korea Electric Power Fund, for example, will be further reduced to 2.7% by July next year, following a cut from 3.7% to 3.2% in July of this year. Additional reductions include farmland conservation charges, set to decrease by 399.9 billion won, and natural gas import charges, which will drop by 225.4 billion won.
Moreover, the government is advancing a bill that seeks to abolish 22 levies, including departure payments and movie theater admission charges. If the bill passes, the total number of levies will shrink from 91 to 69.
However, the reduction in levies will likely strain several key projects. For instance, funding for new and renewable energy initiatives, which have been a priority under the Yoon Suk Yeol administration, has already been halved.
Compounding this issue is the rapidly increasing investment needed for the electricity grid, especially as semiconductor factories and data centers—known as “electricity-eating hippos”—continue to concentrate in the metropolitan area. Korea Electric Power Corporation (KEPCO) estimates that the cost of investments in power transmission and substation facilities will reach 56.5 trillion won over the next 15 years, from 2022 to 2036.
Yoo Seung-hoon, a professor of energy policy at Seoul National University of Science and Technology, highlighted that the burden of Korea’s electricity fund is relatively low compared to countries like Germany, where the levy accounts for nearly half of electricity bills. He emphasized that KEPCO must effectively utilize the electricity fund, as it cannot bear the full weight of grid investments alone.
Work cited
전력기금도 ‘뚝’…재생에너지 어쩌나, 경향신문,박상형 기자
https://n.news.naver.com/mnews/article/032/0003318922 accessed September 4th,2024
By. Taewon Heo