South Korean president proposes a reunification tax

On Sunday, South Korean President Lee Myung-bak proposed a tax to begin to save for the cost of reunifying the Korean peninsula, despite the possibility of worsening relations with North Korea in the process. Lee expressed optimism about reunification while maintaining demands that North Korea abandon its nuclear arms ambitions.

In a speech commemorating the 65th anniversary of the Korean liberation from Japanese rule, Lee stated he "believe[s] that the time has come to start discussing realistic policies to prepare for that day [of reunification] such as a reunification tax." The tax would fund the absorption of the North Korean economy — which is less than three percent of the size of the South Korean economy — and could cost up to $1 trillion, according to New York Times' sources.

However, "North Korea will take a unification tax as the expression of a South Korean attempt to prepare for a sudden collapse of the North Korean government," according to Kim Yong-hyun, an analyst at Dongguk University in Seoul. Additionally, while opinion polls show that more than 60% of South Koreans want unification, these polls also show that South Koreans would prefer that reunification happen later due to the cost.