BMW, Mercedes, Volkswagen face consumer backlash

Foreign car brands refuse to refund part of sales tax to buyers

By Lee Hyo-sik

BMW, Mercedes-Benz, Volvo and Infiniti are drawing consumer complaints for their decisions not to refund part of sales taxes to those who purchased vehicles in January.

On Feb. 2, the government announced a plan to extend the consumption sales tax cut through June in a bid to bolster sagging domestic consumption, following a steep fall in consumer spending last month. The government’s initial sales tax cut from 5 percent to 3.5 percent, which began last September, ended in December. It decided to retroactively return the sales tax on vehicles purchased in January.

Foreign car brands say that they slashed prices of their vehicles in January through sales promotion to make up for the end of the sales tax cut, so that they wouldn’t have to return the sales tax, which amounts to 1.5 percent of the car payments.

However, those who bought the cars from these imported car brands say that they deserve to get the tax back. They argue foreign car importers should refund the money because the venders lowered the prices through a promotion, not because of the government tax cut. If motorist bought a vehicle priced at 100 million won, he or she could get 1.5 million won in sales taxes returned.

“We decided not to refund sales taxes even though the government returned part of the tax on vehicles purchased in January,” said an official at Han Sung Motor, the largest Mercedes-Benz dealer in Korea. “In January, we lowered vehicles prices reflecting the end of sales tax cut through a promotion. So we cannot give customers the tax return, which amounts to 1.5 percent of the car price.”

Officials at BMW, Volkswagen, Volvo and Infiniti echoed Mercedes-Benz’s views, saying that they have no plan to return the sales tax cut.

However, consumers who bought cars from these foreign brands are furious, saying that they should get the tax refund.

An office worker residing in Seoul, who purchased a sedan from one of the five foreign car importers, said he should get the 1.5 percent sales tax back.

“It is common sense that when the government lowers sales taxes, the seller should slash the price by the same amount,” said the office worker who declined to be named. “It is nonsense for import car dealers to refuse to return what consumers deserve.”

In contrast, Audi has decided to refund the 1.5 percent sales tax to customers. The country’s five automakers ― Hyundai Motor, Kia Motors, GM Korea, Renault Samsung Motor and Sssangyong Motor ― either have already paid the refund or plan to do so in the near future.

According to the Korea Automobile Importers and Distributors Association, a total of 85,161 foreign cars were sold between September and December last year, a 26.1 percent increase from the same period a year earlier.

But the sales of vehicles produced by domestic automakers rose only 18 percent to 509,269 over the same period, meaning that foreign car companies benefited more from the government’s consumption tax reduction.