The government will rescind its earlier decision to adjust excise taxes on certain imported luxury goods after it has found no actual price benefits reaching consumers, the finance ministry said Tuesday.
In late August, the finance ministry raised the minimum tax base for seven luxury items as of Aug. 27 in a bid to get companies and importers to lower prices that can spur consumer spending. The seven are jewelry, furs, handbags, watches, furniture, carpets and cameras.
The government raised the value of imported goods subject to excise taxes from 2 million won to 5 million won. The country’s excise tax rate stands at 20 percent of the import price.
Under the latest readjustment, the minimum tax base for handbags, watches, furniture, carpets and cameras will again be lowered to 2 million won starting in late November or early December at the latest. This means companies will again have to pay more taxes on these items.
It, however, said tax benefits given to jewelry and furs will remain unchanged since prices of these products have gone down.
“When the government lowered excise rates, the goal was to forgo state revenue to some extent so consumers can benefit from lower prices,” said Lim Jae-hyeon, the head of the ministry’s property and consumption tax bureau.
He said that since such changes have not materialized, it is only natural that the policy measure be changed again.
The official said that he held talks with local representatives of companies that sell luxury bags, watches and other items but did not get a satisfactory reply on why prices have not come down.
“They said they were not at liberty to set prices and that such decisions can only be made by the manufacturer,” Lee said. “These companies admitted that they had not marked down prices even when they were paying less in taxes for the products they imported.”
Besides the seven luxury goods, the government adjusted taxes slapped on automobiles and large consumer electronics goods as of late August. These tax breaks that will be maintained until the end of the year have helped spur a rise in demand that has benefited the economy. (Yonhap)
