By Ryu Jin
Staff Reporter
Mercedes-Benz Korea said Tuesday that it has been informed of a tax audit by the National Tax Service (NTS), the first of its kind since the company went into business in South Korea in 2003.
Coming amid a controversy over ``bubbles’’ in the prices of imported cars, the tax probe is drawing much attention since it could lead to a wider scrutiny into other importers of foreign-made vehicles.
Mercedes-Benz Korea said it had recently been notified by the Seoul Regional Tax Office that the company was to be the subject of a tax probe. ``We were informed that the investigation would start as early as this weekend,’’ a company spokesman said.
Sources indicated that the NTS would look into suspicions that the company has been dodging taxes by importing cars at inflated prices from its headquarters in Germany.
Mercedes-Benz Korea has been accused of selling luxury cars in South Korea at prices much higher than in other countries, sometimes even twice as expensive than the same vehicle sold in other countries such as the United States and Japan.
It has also been allegedly making illicit profits for the past several years since it costs more to import the same car into South Korea than it does into Japan and the U.S.
According to a former Mercedes dealer, the top-end Mercedes S500L sedan costs roughly 90.9 million won ($98,800) in the U.S. and 111.1 million won in Japan.
In South Korea, the import price of the same car is 114.69 million won. Once the local office tacks on its sales margin and tax, the price of S500L surges to 206.6 million won, almost double the money Japanese and American consumers pay.
``Such practices mean that the company has been transferring profits to its German head office,’’ an industry source said on condition of anonymity. ``One of inferable suspicions is that the company has been intentionally reducing profits here in order to escape paying taxes.’’
Mercedes-Benz Korea denied such allegations, however. ``We understand that the upcoming tax probe is just a regular one, which the tax authorities usually carry out to look into companies, which have been in business here for more than five years,’’ a company official said.
Other industry sources, however, raised concerns that the upcoming investigation into the leading player could be a signal of wider scrutiny of other companies.