A proposed amendment to the Individual Consumption Tax Act that was to impose a 20% consumption tax on bags with an importation price of over KRW 2million was abandoned by the tax subcommittee of the Korean National Assembly's Strategy and Financial Committee until 2014. The tax would have likely hit many of the super luxury brands such as Louis Vuitton, Fendi, Prada and the like.
The main, facial, purpose of the amendment was to harmonize this punitive consumption tax with the punitive consumption taxes imposed on other "luxury" goods such as designer watches, furs, and jewelry.
Hopefully, the committee will consider amending the tax law to scrap all punitive taxes. These taxes are simply leading more to choose foreign destinations for their luxury good purchases.
We are hopeful that the Park Administration will strive to decrease taxes and regulations that are assisting in forcing more Korean and international companies and consumers to consider other more tax-friendly destinations for investment and discretionary spending.
Article amended to include the suspension of special tax until 2014.
Sean Hayes may be contacted at: SeanHayes@ipglegal.com.
Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the only non-Korean to have worked as an attorney for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty.