March 26, 2009

S. Korea cuts taxes for car buyers

South Korea said it would cut taxes related to vehicle purchases by 70 percent starting May 1 to help spur demand and improve the economic environment.

The tax break has a ceiling of $1,860 and will remain in effect through the end of the year, the Yonhap News Agency reported Thursday. It applies to those trading in cars that were registered before Jan. 1, 2000, Yonhap said.

The total number of cars that the temporary benefits apply to is estimated at around 5.5 million, but if just 5 percent of the older model car owners buy new vehicles, it translates into sales of 250,000-260,000 units, Knowledge Economy Minister Lee Youn-ho said.

The changes could also help improve the country's carbon dioxide emissions by 2 percent, Lee said.

About 1.6 South Koreans work in the automotive industry, where vehicle production slumped 34.1 percent in the first two months of the year, compared to the same period in 2008.

South Korea produces about 6 percent of the world's motor vehicles. About 2.83 million vehicles were produced in 2008.