Porsche, Ferrari buyers may pay more taxes

By Lee Hyo-sik

Porsche, Ferrari, Maserati and other foreign luxury auto brands will likely suffer sales declines if proposed changes to the country’s tax codes go into effect, according to auto industry analysts, Friday.

A ruling party lawmaker has proposed a revision to the tax codes governing automobiles, which currently imposes an auto tax on motorists in accordance with the engine size of their vehicles. The revision calls for levying taxes based on the value of vehicles.

If realized, owners of high-priced foreign vehicles will have to pay significantly higher taxes than they do now, adversely affecting the sales of luxury car makers.

Rep. Shim Jae-chul of the ruling Saenuri Party said Friday that he will soon forward a revised local tax bill to the National Assembly for approval, seeking to change the guidelines on how municipal governments tax motorists every year.

“The current auto tax codes are unfair to individuals who drive low-priced vehicles, mostly produced by domestic automakers, because they pay taxes based on the size of engine, not the value of vehicles,” Shim said. “On the other hand, those driving high-priced foreign cars pay the same or even less taxes even though they own much more expensive vehicles. It is unfair.”

The lawmaker argued that it makes more sense for the government to charge people who own expensive cars higher taxes, while lessening the tax burden on those driving relatively inexpensive vehicles.

For instance, people who own the BMW 520d sedan with an engine capacity of 1,999cc paid about 400,000 won in auto tax last year. This is the same for those driving Sonata sedans powered by a 1,999cc engine. But the BMW 520d is three times more expensive than the Sonata.

According to Shim’s revision, people driving a vehicle worth less than 15 million won would be required to pay 0.8 percent of the car value as tax every year, while those owning cars worth between 15 million won and 30 million won would pay 120,000 won in addition to about 7 percent of the vehicle value exceeding 15 million won.

Motorists driving vehicles worth more than 30 million won would pay 330,000 won in addition to 5 percent of the value exceeding 30 million won, which will significantly increase the tax burden on high-priced luxury vehicles.

The lawmaker said under his proposal, people driving Kia Motors’ Soul compact car will pay 73,200 won in tax, down from the current 78,840 won. The auto tax for Hyundai Motor’s Sonata sedan will drop to 224,300 won from the current 399,800 won.

“The revision seeks to changes how we tax automobiles. It levies taxes based on the value of vehicles, not the size of their engines,” said an official at a domestic automaker. “If the revised bill is passed by the Assembly, it will negatively affect foreign luxury car brands here,”

In contrast, the change will benefit local carmakers, which produce an extensive lineup of relatively low-priced cars, he said.