Gov't pushing tax cuts for struggling auto industry

(ATTN: UPDATES with more details in paras 5, 7; ADDS with comments in paras 9-10)
By Lee Joon-seung
SEOUL, Dec. 5 (Yonhap) -- The government is considering granting extensive tax
cuts to local automakers struggling with sinking domestic and overseas demand
amid a global economic slump, a senior policymaker said Friday.
Combined vehicle sales for industry leader Hyundai Motor Co. and four others fell
12.1 percent on-year to 445,111 units in November, prompting Hyundai and GM
Daewoo Auto & Technology Co., the South Korean unit of General Motors Corp., to
cut output.
"The government is pushing to adjust the excise tax and environmental improvement
charges levied on vehicles," Knowledge Economy Minister Lee Youn-ho told
reporters after an emergency meeting of economic ministers.
Such measures are necessary to prop up sagging domestic demand and compensate for
the sharp drop in overseas orders, he said. Various taxes make up about 24
percent of total auto prices, far beyond those charged by other countries.
"Carmakers made specific recommendations on the need for excise tax cuts and
details are being discussed with the finance ministry so they can be implemented
as soon as possible," Lee said. The government has the authority to immediately
cut excise taxes, which make up 10 percent of car prices, by 30 percent.
The minister also said, without going into details, that talks between creditor
banks and Hynix Semiconductor Inc. are progressing well and that some form of
understanding is likely.
The world's No. 2 computer chipmaker reported earnings of 2 trillion won (US$1.35
billion) in both 2005 and 2006, but began struggling in 2007 due to a weakened
global semiconductor market. Losses may exceed 1 trillion won this year.
"While Hynix is suffering, it is still doing better than foreign rivals," Lee
stressed. He added that while the government has a contingency plan if talks
between Hynix and its creditors fall through, active support is not being
considered since this would conflict with World Trade Organization guidelines.
Reflecting difficulties being voiced by other sectors, the minister said Seoul is
encouraging restructuring efforts by petrochemical companies that have started
cutting production.
"If there are barriers to restructuring, the government will do its part to
adjust taxes and anti-monopoly rules," he said
Lee, meanwhile, said that Seoul has set up a three-tiered warning system to check
the health of nine key industries that make up the bulk of the country's
production, export and job market.
"The green, amber and red warning system will check the health of individual
industries so the government can implement emergency measures if the need
arises," he said.
Those industries are autos, shipbuilding, petrochemicals, semiconductors, steel,
textiles, displays, mobile phones and general machinery.
yonngong@yna.co.kr
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