I was part of a 34 member delegation from 10 jurisdictions around the world, invited to visit the DPRK on a mission ‘affiliated' with Rotary International – yes, I've been a member of Rotary Clubs for over 30 years!. I was the only U.S. passport holder within this group. My visa was stapled within my passport, which I got back from the visa issuers at the airport, prior to departure. The visa was removed at the airport, upon my departure. I am still kicking myself in my rear-end for not getting it photocopied - or attempting to get it photocopied, as the 'business center' at the Hotel Koryo in Pyongyang might have refused to copy it.

Our visit included meetings with Deputy Minister of Foreign Affairs (and Vice Chairman of the Korean Association of Social Scientists - the organization that will write tax law) and Hwang Choi Man, Vice-Director of the Legal Division of the Investment Commission of the DPRK. Under the the umbrella of his responsibilities is the development of the Hwangumpyong Island Special Economic Zone, a trade zone being set up as a conduit for much needed hard currency by the DPRK.. A comment about Hwang's business card: It was two-sided, with English on one side and Chinese on the other side. I wonder if he has a Korean name card at all. The Chinese translation of Hwang's office and job title were far more accurate, though. If one were to rely upon the English side, you'd assume that Hwang was only a 'Senior Manager'.

Translator for both speakers was Kim Jusong, who I met the previous night at dinner. He was previously the head of the English language department at Pyongyang University. His wife is an attorney. I am sure that he is 'more' than just a translator but he is called upon to be one, as necessary.

I fully realize that the United States imposes trade sanctions upon doing business with the DPRK but readers from other countries are not limited by these sanctions. I do not believe, though, that writing about the development of a DPRK tax system is subject to restrictions. In fact, it is beneficial, in the long run - especially when sanctions are lifted, which, at some point in time, they will be...

The DPRK is, as you might already know, a closed society. They are one of the few societies cut off from worldwide communications - not just Facebook! What we outside of the DPRK do not realize is that this is not a 'Godless' state - their great leader, Kim Il Song, is revered and worshipped as a God in what I view as a very, very religious nation. Kim Jung Il, son of Kim Il Song, who just passed away led the nation and was the center of reverent attention throughout the hours that DPRK television is on. The grief that was skeptically viewed by many, otherwise objective news organizations in the west is truly genuine. We outside of the DPRK read all about the acts of Kim Jung Il vis a vis nuclear weaponry, bombing South Korea vessels and territory, famines, floods, what-have-you.

Those living in the DPRK have absolutely no idea what transpires anywhere outside the DPRK. The place is a closed society. During our trip, we were watched/overseen by ‘handlers' who would not let us talk to anyone.......there is true non-DPRK news blackout.

Kim Jung Un, mid-20s, son of Kim Jung Il is heir apparent. This place is truly an absolute monarchy supported by a military class desirous of stability. While the world seems to wonder what will happen, I personally see things as being stable, with a smooth transition of rule from the deceased king/diety to his heir, who will be guided, initially, by designated regents, who also happen to be part of the ‘royal family' : Kim Jung Il's sister and brother-in-law. Kim Jung Eun, by the way, went to school in Switzerland, so he has some idea of what there might be outside the heavily guarded borders of the DPRK.

There is no income tax in the DPRK. I'm not quite sure if there is money there – the only stores I visited wanted my RMB or Euro – definitely not any US dollars! Housing is free - and that housing throughout the Pyongyang which I saw, appeared quite presentable. Medical care is free in the DPRK although I am sure that some hospitals are better than others and that these facilities are 'restricted' and yet, how can I be completely cynical about a system where the doctors actually make house calls – the visit the patients, not the other way around? The DPRK also provides 11 years free education to a populous that is, as a result, 99 percent literate....but this is still a closed society, shut off from the rest of the world.

The government needs hard currency and is trying to attract business to its new but quite 'restricted' zone. There are other zones already in place – one along the ROK border, strictly for South Korea; one set up in the country strictly for Thailand and two along the PRC to take advantage of PRC business that wants even a lower wage expense than it already has in China. Effectively, the DPRK makes its hard currency revenues in two ways: firstly, as a partner – if not in name, most definitely in reality – by handling the labor needs of its foreign partner. Let us say it bills that Chinese company 50 RMB per hour per employee. The DPRK gets paid, in essence, in advance for labor coss but in turn, its own costs, in payment for those wages, might only amount to 10 RMB per hour. Hence a 40 RMB per hour profit. Additionally, while there is not one, now, there will be a 25 percent corporate income tax.

What about that brand spanking new island zone? Obviously, it will be far more difficult to enter or leave that zone than it was for me to travel in and out of the Shenzhen Special Economic Zone from inception through the mid-90s. But the DPRK government is offering labor - and lots of it, at a fraction of the price, elsewhere! That's why a delegation which predominantly consisted of business people from Hong Kong was so important to the DPRK for business development. The costs of Pearl River Delta labor have sky rocketed and dealing with Vietnam has proven to be a disaster, as the Vietnamese are on a world class level when it comes to being corrupt.. For those labor intensive, inexpensive goods available at Walmart to stay low priced, the DPRK is a very possible 'alternative' for Hong Kong business persons.

Mr. Hwang stated that the DPRK will allow WOFEs but I doubt it. The government would most likely be the partner with outside business primarily for priority manufacture to meet the internal needs of the country, secondarily for the equivalent of a contract processing program where there would neither be import nor export VAT but a corporate income tax of 25 percent profit for 100 percent export businesses in the zone. What the DPRK pays its employees or provides these employees with for housing or food will more than likely bear absolutely no resemblance to the per employee charges it will bill the joint venture - that's where the hard currency needs will immediately be met by the government. But the Hong Kong employer can rest assured that there will be no labor strife or additional 'shenanigans' similar to those they have continually encountered (along with the corruption) in Vietnam.

There is a one page, English language summary of SEZ taxes. It was on a Powerpoint presentation. There is also a one page, English language list of tax incentives. That was also on the Powerpoint presentation. I requested copies and have been told that they will be sent to me. I am not sure that much else is either available or actually even something that the DPRK has even considered as the concept of tax is so 'brand new' to them.

I asked four questions but got an answer for only one of them:

* I asked what the screening and approval process is for a company wishing to manufacture in the zone. I did not get an answer as this has not yet been developed.

* I asked what are the current 'preferred' investments and was told that food processing is a priority and that a candy company would be given priority as well: the DPRK wants locally made, inexpensive chocolate bars available for its citizenry! Also to be given priority would be a shoe manufacturer.

* For SMEs, what is the minimum level of investment to meet zone business requirements? This is another one for which no answer was available.

* Lastly, I asked about what transfer pricing requirements would businesses in the zone be asked to meet. Ultimately, I spent more time with this subject than any other because, it seems, I had 'introduced' a concept about which the people I spoke with were unaware.....and I am positive that some of those Hong Kong business people absolutely hate me for even bringing it up!

I take pride in being a well read, well informed individual, yet nothing could have adequately prepared me for any understanding of the DPRK - you have to be there to begin to understand....

My first book, The Tax Analects of Li Fei Lao, which covers, in executive summary format, the tax systems of 9 jurisdictions of Asia, including that of India., is now being translated by Pyongyang University. There is interest in figuring out how to work selectively, outside of the DPRK and having other jurisdictions bring their business to selective zones in the DPRK. I was told – prior to Kim Jung Il's death - that I would be invited back to discuss development of the DPRK tax system. I think there is a good chance of this happening, after the period of mourning for their monarch/diety has been completed and the next king/god is firmly in place.

Is there a shoe manufacturer interested in setting up shop in the DPRK? Then, after things return to normalcy, this is a business that can be set up – the DPRK government is interested in this as it is for a confectionary company to set up shop, producing candy bars for the local populace. Beware, though, even though you will not be exporting (or perhaps you will be, too – then you ' ve got to take into account transfer pricing issues!), if it is determined that you are making a profit, then you ' re going to have to contend with a corporate income tax – rules most certainly to come!