[2024 Tax Revision] Hybrid Cars Get More Expensive... Tax Reduction Cut from 1.43 Million to 1 Million Won Range

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The government will reduce the individual consumption tax reduction benefit for hybrid vehicles by 300,000 won. This decision is based on the assessment that hybrid vehicles are less environmentally friendly compared to electric and hydrogen vehicles, and considering the challenging revenue conditions, securing tax revenue is necessary.

On the 25th, the Ministry of Economy and Finance held the Tax System Development Committee and announced the "2024 Tax Law Amendment Plan" containing this content. Currently, hybrid vehicle buyers receive a 1,000,000 won reduction in individual consumption tax under the Restriction of Special Taxation Act, but this will be reduced by 300,000 won to 700,000 won. Including education tax and value-added tax on the individual consumption tax, the related consumer benefit will decrease from 1,430,000 won to the 1,000,000 won range.

The period for the individual consumption tax reduction benefit, which was scheduled to end this year, has been extended by two years until the end of December 2026. The government began temporarily providing individual consumption tax reduction benefits from 2009 to expand the supply of eco-friendly vehicles. Since then, it has been extended five times over 15 years. Initially, the benefit applied only to hybrid vehicles, but electric vehicles were added in 2012, and hydrogen vehicles were included in 2017.

However, the individual consumption tax reduction amounts for electric and hydrogen vehicles have been frozen at 3,000,000 won and 4,000,000 won, respectively.

Jung Jeong-hoon, Director of the Tax Policy Bureau at the Ministry of Economy and Finance, explained the reduction of individual consumption tax benefits for eco-friendly vehicles by stating, "Hybrid vehicles have only half the characteristics of being a fully eco-friendly vehicle." Hybrid vehicles are equipped with both an electric motor and an internal combustion engine. Depending on the driving force needed, either the electric motor or the engine is used, and energy generated from deceleration is converted into electrical energy. Since hybrid vehicles have characteristics of internal combustion engine vehicles, unlike electric or hydrogen vehicles, the benefits have been differentiated accordingly.

The unstable tax revenue situation is also interpreted as influencing the reduction of individual consumption tax benefits for hybrid vehicles. According to the 2024 Tax Expenditure Budget, this year's national tax reduction amount is expected to increase by 7.6 trillion won from the previous year to 77.1 trillion won. Among this, the reduction amount for individual consumption tax and education tax is 550 billion won, with reductions due to hybrid vehicles amounting to 202 billion won for individual consumption tax and 59.9 billion won for education tax. Reducing the individual consumption tax benefits for hybrid vehicles means it will be easier to secure tax revenue accordingly.

This content was produced with the assistance of AI translation services.