The individual consumption tax paid on the purchase of a domestic passenger car will be reduced by up to 300,000 won per unit from July. The increase in liquor tax on beer and makgeolli (takju) will be reduced from 5.1% to 3.57% this year. The subject of individual use tax payment for golf courses is expanded to non-member golf courses.
○ Eliminate reverse discrimination in domestic car taxation
On the 18th, the Ministry of Strategy and Finance published the ‘2022 tax reform subsequent enforcement ordinance amendment’ containing this content. From 1 July, the government decided to set the selling price minus the distribution margin as the tax base when calculating individual consumption tax. The opening tax is set at 5% of the price taken out of the manufacturing site. In addition, the education tax is attached at 30% of the individual tax amount. Currently, the opening tax has been reduced from 5% to 3.5% to stimulate consumption.
Meanwhile, the government has raised an opening tax on the selling price instead of the price taken out of the manufacturing site when the manufacturing site and the seller are the same or have a special relationship. This is because there is a possibility of deliberately lowering the price taken out of the manufacturing plant in order to avoid paying tax. Domestic cars were taxed on the final selling price, which includes distribution margin and SG&A expenses, as manufacturing sites and consignment dealers are closely linked. On the other hand, for imported cars, an opening tax is charged on the declared import price, and then delivery margins are added. A Hyundai car that won 60 million pays more taxes than a Mercedes-Benz car that won 77 million.
The government sees such reverse discrimination as a problem and decided to adjust the tax base by considering the distribution margin even if the manufacturer and seller are the same. Koh Kwang-hyo, head of the tax department at the Ministry of Strategy and Finance, said, “The price of passenger cars will go down 200,000 to 300,000 won.”
○ Tax on beer and rice wine increased by 3.57%
The tax on beer and takju will rise by 3.57%. Beer will be raised from 855 won 20 won per liter to 885 won 70 won per liter, and Takju will be raised from 42 won 90 won to 44 won ‘to win 40 per liter won. This tax rate will be applied starting from April 1, 2019. The rate of increase of 3.57% is 70% of last year’s consumer price inflation (5.1%). The Ministry of Strategy and Finance explained that it was raised to the lower end of the elastic adjustment range (70-130%), considering that the inflation rate was high last year.
The burden of individual use tax on golf courses will be expanded. From July 1, an opening tax of 12,000 won per person, originally imposed on membership golf courses only, will be imposed on general non-member golf courses. Including education tax, a special tax on rural development, and sales tax, a tax of 21,120 is levied and earned per visitor. Only places not exceeding 247,000 won on weekends and 188,000 won during the week are classed as ‘public golf courses’ and exempt from opening tax.
If you take the exams for tax accountants and customs brokers, you will have to pay 30,000 won each for the first exam and the second exam starting next year. However, the English test accreditation period required for the tax accountant test will be extended from two years to five years to reduce the burden. Study cafes, fishing boats, and ambulance service businesses are required to register as merchants of credit cards and cash receipts if their annual income exceeds 24 million won. The simplified duty rate for goods bought as personal property when traveling abroad will be reduced from 20-55% to 15-47%.
The college entrance exam fee is added to the tax deduction for educational expenses.
Reporter Jinkyu Kang josep@hankyung.com
