South Korean Automakers Urge Government to Lower Automobile-Related Taxes

Strategic Insights -

South Korean automakers, led by the Korea Automobile Manufacturers Association (KAMA), have called on the government to reduce automobile-related taxes, citing the substantial burden on both the industry and its customers. According to KAMA, automobile-related taxes reached 32.17 trillion won (US$27.6 billion) in 2009, accounting for 15.8 percent of the government's total tax revenue. Despite a 3.3 percent increase from 2008, the industry is pushing for reform, highlighting the disparity between taxes on new vehicle purchases and ongoing operational costs.

Key Takeaways:

  • Automobile-related taxes in South Korea amounted to 32.17 trillion won (US$27.6 billion) in 2009, representing 15.8 percent of the government's total tax revenue.
  • The tax revenue increased by 3.3 percent from 2008, a year in which the government offered tax incentives for replacing aged vehicles.
  • Despite terminated tax support for the automobile industry at the end of 2009, KAMA believes it will have a minimal impact on sales, as most revenue comes from operational costs, not new vehicle purchases.
  • Each new vehicle buyer in 2009 incurred an average tax burden of 392,000 won, while ongoing vehicle maintenance and operation incurred an average tax burden of 1.26 million won per vehicle.
  • The high tax on fuel (over 50 percent) is a significant contributor to the substantial operational tax burden.
  • KAMA urges the government to revise the tax system to ease the burden on car owners and stimulate the automobile industry.

Statistics:

  • Automobile-related taxes in 2009: 32.17 trillion won (US$27.6 billion)
  • Share of automobile-related taxes in the government's total tax revenue (2009): 15.8 percent
  • Increase in automobile-related taxes from 2008 (2009): 3.3 percent
  • Number of new vehicle sales in 2009: 1.46 million units (up 17.5 percent from 2008)
  • Average tax burden per new vehicle buyer (2009): 392,000 won
  • Average tax burden per vehicle owner for maintenance and operation (2009): 1.26 million won

Sources:

  • KAMA (Korea Automobile Manufacturers Association)
  • (Yonhap)