The government listed a range of tax benefits Korean consumers will be able to enjoy with the onset of the Korea-U.S. trade pact starting Thursday, in which the biggest price cuts will be on imported cars, wine and fruit.
The Free Trade Agreement between Korea and the United States will immediately cut the import tax to 4 percent from 8 percent for all U.S.-manufactured cars, which could save Korean consumers up to 4 million won for a 50 million won vehicle, the Finance Ministry said.
“The pact will exempt 2,000 won of tax for a bottle of U.S. wine costing 10,000 won, for example. A 100,000 won bag would see a tax cut of 9,000 won,” the Finance Ministry said in a statement.
The pact, due to go into effect on Mar. 15, demolishes tariffs and non-tariff barriers across the agriculture, manufacture and service industries. The deal is expected to boost Korea’s auto parts makers as it would shave 5 to 10 percent age points off tariffs on car parts immediately. While the technology and textile industries are also expected to widen their export farmers across most agriculture sectors will see their market shrink across the next decade.
About 15 percent of import taxes on wine will immediately be exempted starting Thursday. Cherries, grape juice and sultanas will see tax cuts of 24 percent, 45 percent and 21 percent respectively. Tax on U.S.-made garments and bags will shrink by 13 percent and 8 percent each. Consumers using freight services from the U.S. will be able to enjoy tax exemptions of up to $200 depending on the value of goods.
“The tax benefits won’t immediately be reflected on the price tags. Cuts will depend on the new import prices and the new pricing distributors makes,” it added.
The ministry vowed to fully execute 54 trillion won of support budget set aside to help farmers until 2017, including 24.1 trillion won in direct financing.
The government in January decided to provide an additional 2.9 trillion won in support to cushion the impact of the KORUS pact on farmers and fishermen. The total 54 trillion won will be used for direct financing, consulting services and tax benefits for the farming sectors that stand to lose competitiveness with the inflow of cheaper agricultural goods under the reduced tariffs.
Products covered include red meat, poultry, dairy, soybeans, corn, potatoes, wine and fruit. Self-employed farmers and fishermen will receive up to 3.4 million won if they are forced out of their business because of the KORUS FTA.
By Cynthia J. Kim (
cynthiak@heraldcorp.com)
