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Saturday, Sep 13, 2014

Asia

S Korea to hike residence, car taxes

The Korea Herald/ANN | Saturday, Sep 13, 2014

The government said Friday it would the double the residence and automobile taxes in two to three years.

The Ministry of Security and Public Administration said it would issue an advance notice of the revised legislation for the local tax overhaul next week with the aim of boosting local budgets by focusing on broadly raising taxes that were unchanged for decades.

The ministry said the tax increase was "inevitable to secure finances for the government's spending on welfare and security."

Under the tax reform plan, residents will be charged different tax levels depending on where they live ― between 10,000 won ($9.60) and 20,000 won from the current average of 4,620 won.

The ministry also plans to remove the local tax exemption benefit and decrease the local tax reduction rate to under 15 per cent from 23 per cent.

The automobile tax, which has not been raised since 1999, will soar 100 per cent by 2017 to reflect the inflation rate, the ministry said.

The tax imposed on cars in Korea including business vehicles, buses, trucks and autotricycles will be doubled by 2017. Private cars and personal vans were excluded from the list.

The tax rate for trucks with less than a 1-ton loading capacity will be gradually increased over three years to 10,000 won from the current 6,600 won paid annually.

The plan, which requires parliamentary approval, was announced just a day after the government's decision to nearly double cigarette prices starting in January.

Experts said the series of tax and cigarette price hikes announced this week were meant to make up for the revenue shortfall amid the economic slowdown.

The ministry said the proposed residence and automobile tax hikes would generate 500 billion won in revenue and another 1 trillion won from the decrease in reductions and elimination of exemptions for local taxes.

Expanded welfare budgets for child care support and an increase in funds for senior citizens have created a financial burden for local governments.

To carry out such major welfare policies, the local authorities spent 6.3 trillion won this year from 800 billion won in 2008.

Previously, the heads of the country's small cities, counties and wards warned they would be unable to meet welfare spending unless the central government expanded support for them to implement its policies.

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