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Saturday, July 26, 2003

PLUGGING FUND PIPELINE TO PYONGYANG

Chongryun tax breaks face hard scrutiny


Staff writer

OSAKA -- For nearly half a century, the General Association of Korean Residents in Japan (Chongryun) has been the primary voice of the North Korean community in Japan, representing nearly 200,000 people.

Thanks to its status as a de facto diplomatic outpost for Pyongyang, many Chongryun facilities pay reduced taxes or none at all.

But with public sentiment calling for a crackdown on the flow of goods and funds to North Korea after Pyongyang's admission that it abducted Japanese nationals, local governments have said they will start re-evaluating the group's tax status.

Last week, Tokyo Gov. Shintaro Ishihara said the metropolitan government would collect fixed-asset taxes from some Chongryun facilities. Tokyo stopped levying the tax on the group in 1972, when it was recognized as a de facto diplomatic body.

The Kyoto Municipal Government is considering following suit. Vice Mayor Takashi Kawachi has said 19 organizations affiliated with Chongryun's Kyoto chapter would be included in the city's review of public facilities that enjoy lower taxes.

"This is part of a general review, and it is not targeting Chongryun in particular," said Hitoshi Furukawa, a municipal tax official.

But some experts say the review may not stop at fixed-asset taxes and could expand to tax breaks in other areas.

Tsutomu Nishioka of the monthly magazine Modern Korea pointed to the existence of what is said to be a five-point agreement reached between the National Tax Agency and the Chongryun Chamber of Commerce in October 1976.

Under the "agreement," the agency said it would deal with the operating costs of Chongryun-affiliated schools in a "positive manner" -- wording Chongryun interpreted to mean the schools would not face heavy property taxes.

The agency also said it would settle all tax issues for individual members through the chamber. It would not tax chamber dues, and it would treat business travel expenses to a third country by chamber members as nontaxable losses.

"This agreement was revealed in January 1992 by Jong Yong Sik, then chairman of the Chongryun Chamber of Commerce," Nishioka said. "Writing in the chamber newsletter, Jong said the tax problems were solved smoothly and that the chamber had strengthened its right to 'collective bargaining' with tax authorities in 1991."

However, during Diet deliberations in March 1994, tax agency officials denied that the terms constituted a formal, legal agreement. And today, even Chongryun officials do not use the word "agreement" to describe the results of the 1976 meeting.

"It may have been a promise rather than an agreement," said So Chung On, director of the international affairs bureau at Chongryun's headquarters in Tokyo.

But regardless of how it is interpreted and whatever impact any taxation changes might have on Chongryun's economic future, most observers would agree the tax reviews are politically motivated.

"The push to end tax breaks has come rather suddenly, and it is connected to the events that have taken place in Japan since the Japan-North Korea summit last September," when the abductions were confirmed, So said.

Chongryun emphasizes that many of its affiliates that receive preferential tax treatment are cultural organizations that have nothing to do with politics.

So said it was also his understanding that Chongryun schools would not be affected by any changes in tax status, noting that the central government recognizes their educational value.

But those pushing for an end to Chongryun's tax breaks say their efforts are not just an angry response to the abduction issue.

According to former Chongryun officials, there is an organization within Chongryun called Gakushu-gumi that is engaged in intelligence activities and political maneuverings against South Korea.

The Public Security Investigation Agency, in testimony to the House of Representatives in March 1994, said there were unconfirmed reports that Gakushu-gumi had about 5,000 members and was funded by Chongryun members and profits from affiliated enterprises, most of which enjoy tax breaks.

"Ending tax breaks and forcing Chongryun to be more accountable may help clear up some of the mysteries surrounding the funding of Gakushu-gumi," said Lee Ei Hwa, a Kansai University professor and an expert on the North Korean economy. "But many Japanese politicians are hoping it will also shed light on how Chongryun remits money to North Korea illegally."

No one knows the true amount of money Chongryun affiliates have sent to North Korea. In December 1993, then Foreign Minister Tsutomu Hata told a news conference he was informed by public security authorities that between 180 billion yen and 200 billion yen was being funneled to North Korea annually via Chongryun, although most experts say that figure has fallen significantly in recent years.

It is also important to note that many within Japan's North Korean community have long questioned how Chongryun spends its money and support the idea of ending tax breaks if it means securing greater transparency.

"A lot of my younger colleagues and friends don't like Chongryun because it is very vague about where our money is going," said one member of the Osaka chapter who requested anonymity. "Because of the tax structure, it's impossible to get detailed answers on where our hard-earned donations go."

Tales of impropriety abound.

Cho Ryu On, a former North Korean spy who lived in Kobe and published a book on his experiences, told The Japan Times in October 2000, "Friends in Chongryun told me they are angry because about 500 million yen collected from affiliates nationwide in early 1995 for rebuilding the Chongryun school in Kobe (after the Hanshin quake) remains unaccounted for."

The Hyogo chapter would not comment on Cho's claims. He passed away in 2001.

"Stories from ex-Chongryun members over the years, plus the abduction issue and tales of funds being sent to North Korea through Chongryun via the (passenger-cargo ferry) Mangyongbong, are increasing political pressure on Chongryun," Kansai University's Lee said.

"Attempts by local governments to change the group's tax status are a part of this pressure, but whether this will succeed is an open question."



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