November 04, 2015 12:27
The government has decided to scrap consumption tax cuts on luxury bags, watches and other high-end products that were implemented in August in a bid to stimulate private spending.
The government says the luxury brands refused to slash prices and pocketed the extra earnings, which rendered the move pointless. Critics say the government has only itself to blame.
The tax cuts will end later this month.
Im Jae-hyun at the Ministry of Strategy and Finance said, "We have monitored the market and found that few luxury brands reflected the tax cuts on their prices, meaning consumers are not benefiting at all, so we decided to end the measure."
Affected products are bags, watches, furniture, cameras and carpets.
On Aug. 26, the government eased the consumption tax ceiling from W2 million to W5 million for bags, watches and jewelry and from W5-8 million to W10-15 million for furniture.
But Chanel and Louis Vuitton brushed off the government's nudge claiming any price cuts require approval from headquarters. Over the last three months luxury brands made billions of won in extra profits.
- Copyright © Chosunilbo & Chosun.com