Luxury Taxes on Cars to Drop by 20 Percent

Special commodity tax on cars will decrease by 20 percent starting from today until the end of this year. Commodity taxes on air conditioners, projection televisions, and leisure goods will be lowered by 30 percent.

The measure will cut car prices by 1.2 to 2.3 percent and prices of air conditioners by 5.2 percent.

During yesterday’s Cabinet meeting presided over by Acting President Goh Kun, the government approved a law revision to cut the special taxes on big-ticket items by 30 percent and by 20 percent exceptionally on cars until the end of this year.

The government said the measure is to revive sluggish domestic demand and the economy. Some criticize that it was a move to garner votes considering that general elections are now less than a month away.

The changes will lower the luxury tax on cars with an engine capacity of less than two liters from five percent to four percent. The tax on larger engine displacement cars will drop from 10 percent to eight percent.

The luxury tax on air conditioners will drop from 16 percent to 11.2 percent, while the tax on projection televisions tumbles from eight percent to 5.6 percent. The tax on leisure goods including golf clubs will also be brought down from 20 percent to 14 percent.

PDP televisions are excluded from the measure with its current 0.8 percent tax remaining unchanged.

Under the changes, prices of cars with less than 2-liter engines will drop by 1.2 percent. A Hyundai Avante sedan costing 13.9 million won ($10,199) will see 160,000 won shed from its price tag, while a midsize EF Sonata can be bought for 200,000 won less. Luxury cars with 2-liter engines and greater will be priced at 2.3 percent less. A Grandeur will cost 610,000 won less and a Sorento 600,000 won less.

Air conditioners for rooms less than 50㎡and 60㎡use will cost 111,000 won and 140,000 won respectively and can be bought at 5.2 percent lower prices. Prices of projection TVs will drop by 2.8 percent, with a 40-inch TV selling at 50,000 won cheaper and a 50 inch at 80,000 won cheaper.

Excise taxes on 10 kinds of leisure goods, including golf-related merchandise, motor boats, and yachts, will be down by six percent to 14 percent, lowering prices by 8.8 percent. Special commodity taxes on deer horns, royal jelly, and perfume will drop from seven percent to 4.9 percent, selling at 2.7 percent lower price.

Luxury taxes on cover charges for golf courses, casinos, horse racing, and expensive bars will remain unchanged.

Jong sik Kong kong@donga.com