Taxing the Rich
The Ministry of Strategy & Finance announced on Nov. 3 that it will rescind the individual consumption tax cut implemented in Aug. this year, as the benefit of the policy went to companies instead of consumers. The tax cut was applied to the seven categories of bags, watches, cameras, carpets, jewelry & precious metals, fur and furniture. The withdrawal of the policy is not applied to jewelry & precious metals and fur.
“The tax cut was to reduce the tax on each of these items by up to 600,000 won [US$531], but few luxury goods suppliers reduced the prices of their products after the implementation,” the ministry explained, adding, “On the contrary, most of them marked up the prices.” For example, Chanel raised the prices of the Iconic handbag and the Boy Bag by 6 percent to 7 percent on Nov. 1.
The government held meetings with luxury goods importers in the industry in order to ask them to reflect the tax cuts in the prices of their products.
However, they turned down the request, mentioning that the prices are determined by headquarters. The government claimed in response that the tax cut can be reflected because the base price relating to the individual consumption tax is the import declaration price.