Gov’t offers tax incentives to boost new car salesResponding to the recent drop in sales of new vehicles, the government announced Wednesday it will provide tax discounts for new car buyers through the end of June.
The National Tax Service is cutting the individual consumption tax from 5 percent of the car’s cost to 1.5 percent. The discount will apply to those who bought cars from March through June.
It is also lowering other related taxes, extending benefits for trading in cars more than 10 years old and giving subsidies for eco-friendly vehicles. Korea currently provides a 1 million won ($800) deduction for hybrid cars, a 3 million won deduction for electric cars and a 4 million won deduction for hydrogen fuel-cell electric vehicles.
Going forward, the tax authority said it will provide a tax discount of up to 6 million won for those who replace their cars that are more than 10 years old with eco-friendly ones. The tax authority is also providing a tax discount of up to 1.43 million won for those buying non-eco-friendly ones.
The National Tax Service emphasized that the latest tax discount is the largest in history for Korea, as the novel coronavirus outbreak has dealt a significant blow to domestic automakers and related industries.
From August 2015 to June 2016, the National Tax Service deducted 30 percent of the individual consumption tax for new car purchases as consumption fell during the Middle East respiratory syndrome, or MERS, outbreak. The tax agency did the same in the second half of last year to boost consumption.
As their domestic and overseas factories were forced to halt operations since the outbreak, domestic automakers saw both their sales and production rates fall.
The five domestic automakers reported selling 597,826 vehicles last month, down 14.9 percent from 702,497 units sold in March 2019. The coronavirus outbreak dealt a major blow to export volumes for Hyundai Motor, Kia Motors, SsangYong Motor, GM Korea and Renault Samsung Motors.
BY KO JUN-TAE [email@example.com]