A collective of convenience store owners will file a class action lawsuit against the government to demand the repayment of five years’ worth of credit card fees on cigarettes and plastic bag sales. (Image: Yonhap)
SEOUL, Sept. 14 (Korea Bizwire) – A collective of convenience store owners will file a class action lawsuit against the government to demand the repayment of five years’ worth of credit card fees on cigarettes and plastic bag sales.
The collective’s leader, Kye Sang Hyuk, shared with media outlets on September 14 that preliminary discussions with a law firm have already taken place, and that the suit would be officially filed after the upcoming Chuseok holiday season (October 2 through 9 including Hangul day).
Kye said the collective is planning a fundraiser not necessarily because of a lack of funds to back up the lawsuit, but rather as a way of demonstrating the entire industry’s resolve. He is aiming to raise 20 million won.
The average amount that each store owner will request in compensation through the lawsuit is somewhere between 20 and 25 million won.
The profit margin on cigarettes for a typical convenience store is 9.3 percent, while margins for plastic bags can range anywhere from 3 to 7 percent.
With 60 percent of cigarettes sales prices composed of taxes and a 2.53 percent credit card fee on top of overhead, store owners complain that there is nothing left after everyone else has received their cut.
The proportion of taxes on plastic bags was not revealed, but store owners likewise complained about plastic bags as a loss-inducing product. (Image: Yonhap)
The proportion of taxes on plastic bags was not revealed, but store owners likewise complained about plastic bags as a loss-inducing product.
The problem is exacerbated by the fact that cigarettes sales make up nearly half of all revenues for convenience stores. According to Kye, “There being nothing left is a problem, but because revenues stay high because of cigarettes and plastic bags sales, stores become ineligible for various tax cuts.”
Under current law, the four major insurance taxes (national pension, employment insurance, national medical insurance, industry accident compensation insurance) and general income tax are levied based on revenue.
Businesses with revenues of at least 1 billion won become ineligible for VAT refunds.
Reductions in credit card fees are applicable to micro-businesses with maximum annual revenues of 300 million won and small to medium size businesses with maximum annual revenues of 500 million won.
The profit margin on cigarettes for a typical convenience store is 9.3 percent, while margins for plastic bags can range anywhere from 3 to 7 percent. (Image: Yonhap)
Kye criticized the current system, saying it was “inflicting too heavy a burden by bringing on negative consequences even though we actually are collecting taxes instead of the government.”
“Like selling credits on a T-money card, only the proportion of the sales price of cigarettes and plastic bags that counts as the store’s profits should be categorized as revenue,” Kye insisted.
Kye emphasized that the lawsuit against the government was not about money. “Our goal in filing the lawsuit is not about us getting money. Instead, it’s meant as a figurative gesture, a request for regulations to be modified. That’s why if we win, we intend on donating the money into the collective’s coffers,” he declared.
S.B.W. (sbw266@koreabizwire.com)
