SEOUL, May 28 (Yonhap) — South Korea plans to extend a cut in the consumption tax on passenger cars by another six months in a bid to boost domestic demand hit by the pandemic, the finance minister said Friday.
A 30 percent cut in the consumption tax on the purchase of passenger cars is supposed to expire at the end of June, but the country will extend it until the end of this year, according to Finance Minister Hong Nam-ki.
In July 2018, the government slashed the auto consumption tax to 3.5 percent from 5 percent and has continued to extend it in an effort to increase domestic demand.
Asia’s fourth-largest economy is on a recovery track on the back of brisk exports of autos and chips.
But a recovery in domestic demand still remains week in the face of the pandemic-caused extended slump.
South Korean carmakers’ sales jumped 77 percent in April from a year earlier on robust overseas demand for SUVs amid the pandemic. But their domestic sales fell 6.6 percent on-year to 135,601 units last month.
Local automakers have suffered a global shortage of automotive chips, with industry leader Hyundai Motor Co. and its affiliate Kia Corp. being forced to temporarily suspend their production lines.