Yoon's license plate plan to be road block for corporate car misuse

President-elect Yoon Suk-yeol has an ambitious goal of preventing tax evasion by changing the color of number plates of company-owned cars. But whether this change will actually be effective remains to be seen.

Yoon in January promised that he would change the color of number plates of company-owned cars from the current white to light green to make them distinguishable from personal cars.

This is intended to prevent business owners from evading taxes by purchasing luxury supercars as fleet vehicles and using them for personal purposes. A fleet vehicle is a type of car that is owned or leased by a business.

Eight out of 10 supercars purchased in Korea were registered to companies last year, according to a report published by the Korean Automotive Manufacturers Association (KAMA).

Seven luxury carmakers — Maserati, Bentley, Lamborghini, Ferrari, Rolls-Royce, Aston Martin and McLaren — sold a total of 2,390 vehicles in Korea last year. Of them, 2,026 units, or 84.8 percent were purchased by companies.

British carmaker McLaren sold 27 cars in Korea last year, all of which were owned by companies. Rolls-Royce, another British luxury car manufacturer, sold 189 vehicles, and of them, 94 percent were registered by companies.

The situation was no different for other high-end carmakers: 89.4 percent of Ferraris sold were corporately owned, 85.6 percent of Lamborghinis, 82.9 percent of Maseratis, 81.6 percent of Aston Martins and 80.6 percent of Bentleys.

McLaren cars sold for an average of 404 million won ($327,520) per unit last year, according to Seoul-based market tracker CarIsYou. The average price of a Rolls-Royce was 609 million won, while a Ferrari cost 515 million won per unit. Lamborghini cars sold for 371 million won on average.

Company cars are managed by corporations, therefore the related expenses are charged to corporate accounts. As corporate tax is calculated based on a company’s operating income, which is the profit left after deducting the operating cost, the amount of corporate tax and income tax decreases when the maintenance expenses spent on cars are deducted from the revenue.

Moreover, as corporate tax rates vary depending on the amount of taxable income, supercars that cost several hundred million won each can be used to cut tax rates. The corporate tax rate is 20 percent for tax base exceeding 200 million won and 10 percent for those below that level.

“There probably aren’t that many cases where supercars, which are really expensive to maintain, are actually used for business purposes,” said Mo Chang-hwan, a senior research fellow at the Korea Transport Institute, adding that “in some cases, family owners take advantage of corporately owned cars for personal use to save money.”

President-elect Yoon argues that changing the color of number plates would help the tax authorities when tracking down the illicit use of company-owned vehicles, while also adding pressure on those who are violating regulations. Currently, both personal and corporate cars use white number plates.

“The proposal is currently under review as the related rules can be adjusted through a public notice issued by the ministry and there is hardly any opposition,” said Kim Tae-heung, assistant director at the Ministry of Land, Infrastructure and Transport, adding that the revised rules “may be adopted in the first half of next year.”

However, some experts argue that changing the color of number plates won’t make much of a difference.

“There are a lot of ways to weasel out of that regulation, such as falsifying records or heavily tinting windows,” said Lee Hang-koo, a researcher at Korea Automotive Technology Institute.

“We need to improve the current system by following the example of other countries such as Singapore, where strict regulations are implemented on corporate cars,” said Kim Pil-soo, an automotive engineering professor at Daelim University.

BY MOON HEE-CHUL [shin.hanee@joongang.co.kr]