Lawmaker urges change in corporate car tax law

Finance Minister Choi Kyung-hwan said the government will review strengthening tax laws on corporate cars after a lawmaker called for tighter rules to prevent business operators from evading taxes by registering a personal vehicle as a company car.

Purchasing and registering luxury import cars has been a traditional way of paying less taxes for many business operators or executives at many companies, thanks to the lax corporate tax code in Korea which grants tax reductions on all costs involving corporate cars. Local laws also slash taxes for car insurance, auto lease fees, fuel fees, auto taxes and even highway tolls.

More than 87 percent of luxury import cars sold in Korea last year with price tags higher than 200 million won ($169,000) appeared to have been registered by a corporate body, said Rep. Yoon Ho-joong of the New Politics Alliance for Democracy.

The statistics were submitted by the Ministry of Strategy and Finance and the Citizens’ Coalition for Economic Justice for parliamentary audit on Tuesday.

Rolls-Royce’s authorized dealer in Korea sold only five units of its Phantom last year. Each unit is priced at about 590 million won, and all were purchased for corporate use, the figures showed.

The report also showed six Bentley Mulsanne cars were sold in Korea last year, each priced at about 470 million won, and 28 units of the Rolls-Royce Ghost sold in the country were all purchased by corporations.

To prevent business operators from evading taxes by registering personal cars as corporate cars, the government recently revised the tax code to put stricter conditions for corporate cars to receive tax benefits. The revised code required all corporate cars to have the company’s logo attached to the car and drivers to cover 50 percent of the car maintenance.

However, Yoon said the recent revision was still insufficient and called for further legal measures.

“It is not fair that individual consumers are responsible for paying the initial price and maintenance costs fully, whereas the current tax code cannot punish business operators who personally purchase a car and register it to their corporate body in order to save some taxes,” Yoon said.

“Despite the Finance Ministry’s recent revision of the tax code, it needs to further reduce tax reduction benefits to stop local business operators from abusing corporate tax codes.”

Choi said that “the ministry will review [the law] ... We will also discuss other policy measures that will make the tax code more practical.”

BY KIM JI-YOON [kim.jiyoon@joongang.co.kr]