Foreign carmakers refuse refund

The government’s decision to lower the individual consumption tax on cars has come under fire after many popular foreign brands have declared they will not follow the policy.

According to imported car industry officials on Thursday, Mercedes-Benz Korea has decided not to refund the tax to customers who purchased cars between Jan. 1 and Feb. 1.

Earlier this month, the Ministry of Strategy and Finance announced it would lower the individual consumption tax on cars once again to boost the economy. The move came after automakers saw sales drop significantly in January following the end of a temporary tax reduction in December. The ministry said it would lower the tax on cars from 5 percent to 3.5 percent starting Feb. 2 and maintain the policy through June. Customers who purchased cars prior to the tax cut would receive tax refunds worth between 200,000 won ($160) and 2 million won.

But after Mercedes-Benz refused to refund the tax this week, a total of five foreign brands, including BMW, Mercedes-Benz and Volkswagen - the three best-sellers in Korea - as well as Japanese automaker Infiniti and Volvo Car Korea, have declared they will not follow the government’s policy.

“In January, we already offered some discounts big enough to cover the tax cut driven by the government, meaning we already had extended the individual consumption tax cut on our own before the ministry carried it out,” Shin Jae-sung, a spokesman for Mercedes-Benz Korea told the Korea JoongAng Daily. “But we will refund the tax to customers who bought newly launched models like the GLC and GLE [SUVs] in January, as there were no promotions on those cars.”

But some disagree that a tax cut and voluntary discount promotion can be considered the same thing.

“This is insane,” said customer Kim Young-hak, who purchased a BMW 3 Series sedan in January. “It doesn’t matter what the reasons are. They just simply don’t want to give the money that is already in their pocket.

“When I heard that foreign automakers are only interested in making money here and don’t care about customers, I thought it was inappropriate to judge them like that,” Kim said. “Now, I feel like that’s true. It looks like they totally don’t care about our government and consumers. A discount promotion is only part of their marketing to sell more cars.”

But other people are saying the government is being dishonest in its motives.

The Finance Ministry said earlier in the month that reducing the individual consumption tax was necessary to boost the local economy, but some say the government was really after more tax revenue. This is because the relatively small tax cut would spur more people to buy cars, which are still heavily taxed in other ways.

“It means that car sales are directly related to the government’s tax revenue,” said Kim Pil-soo, professor at Daelim University’s automotive engineering department.”

But it looks like the government isn’t going to do anything about the issue

“It is inappropriate that the five foreign automakers are refusing to refund the tax,” a Finance Ministry spokesman said. “Unfortunately, there are no legal steps we can take to make them follow our policy now, as it is a dispute between private companies and individual consumers.”

BY KWON SANG-SOO [kwon.sangsoo@joongang.co.kr]