Gov't postpones plans to raise vehicle tax on rent-a-car companies

The government has delayed plans to raise vehicle taxes on rent-a-car companies in the face of stiff opposition from operators, an industry source said Thursday.

According to the Korea Rent-A-Car Association (KRCA), which lodged a strong protest against the move that would have gone into effect next year, the Ministry of Government Administration and Home Affairs has agreed to review its plan from scratch.

Earlier in the year, the ministry said it would revise the country's local tax rules, so that fleet cars that are rented out to the same individual client or corporate entity for more than a month would be taxed like ordinary passenger cars.

This move would compel rent-a-car companies to pay the same amount of taxes as private vehicle owners.

The KRCA, however, claimed that such a change could cause the tax burden for rent-a-car companies to surge roughly tenfold, to about 210 billion won (US$188.3 million) annually. It said that under such circumstances, many in the sector will lose money and be forced out of business.

Moreover, it said the government's decision is unfair because it has taken no such action against vehicles such as chartered buses, trucks and construction equipment, which are usually rented for long periods of time.

"Since the ministry has decided to put the changes on hold, rent-a-car companies will not hold nationwide rallies condemning the move," a KRCA official said.

As of late October, South Korea's rent-a-car businesses had a fleet of 420,000 cars. Annual sales of these firms were last tallied at 3.5 trillion won, with net profits hitting 150 billion won. (Yonhap)