The Democratic Party Considers Long-Term Tax Exemptions for Eco-Friendly Vehicles

[Asia Economy Reporter Kiho Sung] The Democratic Party of Korea is considering a policy to provide long-term tax exemption benefits to customers who purchase eco-friendly vehicles such as electric cars and hydrogen cars. This is to promote the spread of eco-friendly vehicles while fostering the domestic automobile industry. Experts also point out that a long-term tax exemption policy is essential to enhance the competitiveness of domestically produced eco-friendly vehicles.

According to political circles and the automobile industry on the 12th, the Democratic Party has set this policy direction and is reportedly engaged in internal discussions. A ruling party official stated, "Various discussions are currently underway to expand support for eco-friendly vehicles," adding, "Policies related to long-term tax exemption benefits are also being discussed."

The policy direction being considered involves providing benefits such as long-term individual consumption tax reductions to customers who purchase eco-friendly vehicles. The government is currently implementing individual consumption tax reduction benefits to foster eco-friendly vehicles, but the period until sunset (abolition) is relatively short, about two years. Therefore, the government has been extending the benefit period through amendments to the Restriction of Special Taxation Act ahead of the sunset.

The timing of the abolition of individual consumption tax reductions for eco-friendly vehicles also varies. Under current law, the reduction for electric vehicles (up to 3 million KRW) lasts until this year, while reductions for hybrid vehicles (up to 1 million KRW) and hydrogen vehicles (up to 4 million KRW) ended in 2021 and 2022, respectively.

The ruling party is pushing for a plan to implement the individual consumption tax reduction period for more than five years on a long-term basis. Through this, they expect to establish a virtuous cycle structure where not only the domestic eco-friendly automobile industry develops but also related industries such as batteries and charging stations grow together.

Earlier, on the 24th of last month, Democratic Party lawmaker Kwang-jae Lee pointed out at the 'COVID-19 Pandemic, Korea's Response and Challenges II' forum held at the National Assembly, "If people who purchase eco-friendly vehicles are exempted from individual consumption tax for more than five years, our country can move toward future-oriented automobiles." The ruling party plans to promote this through the newly established permanent committee, the 'Future Transition K-New Deal Committee,' following the conclusion of the 'COVID-19 National Crisis Overcoming Committee.'

However, a ruling party official explained, "Various opinions have been presented within the party regarding the exemption period and limits," adding, "Therefore, it will take some more time for the policy direction to be finalized."

Experts responded positively to the ruling party's policy direction. Professor Ho-geun Lee of Daeduk College's Department of Automotive Engineering said, "In the case of eco-friendly vehicles, especially hydrogen cars, enormous costs and time are required for production facilities and infrastructure construction," adding, "Manufacturers need long-term plans to make large-scale investments and plans."