*This content was translated by AI.
The Korea Tax Policy Society strongly urged the introduction of a 'domestic production promotion tax system' for national strategic technology sectors, including electric vehicles, at its 32nd Tax Policy Seminar held on May 14, 2026. The society proposed amending the Special Tax Restriction Act to include relevant provisions, aiming for implementation in 2027, and emphasized that next year is the golden time to prevent the collapse of the domestic electric vehicle production base.
Oh Moon-seong, president of the Korea Tax Policy Society, pointed out the expanding market share of Chinese-made vehicles in the domestic market and the increasing proportion of overseas production by automakers. Oh Moon-seong analyzed that structural cost disadvantages are worsening because institutional support such as production tax credits, already adopted by major countries including the United States, Japan, and Australia, is absent in Korea.
The proposed tax system targets pure electric vehicles and hydrogen vehicles produced and sold domestically. Taxpayers may choose the more advantageous method between a fixed-amount or fixed-rate approach, and the system includes provisions allowing unused deductions to be directly refunded or transferred to third parties.
The society projected that if this system is introduced, it will have significant positive ripple effects on the entire economy, including securing price competitiveness through cost reductions and stabilizing employment at parts supplier companies. On the other hand, some voices pointed out that such support measures focused on domestic companies could entail trade friction or trade retaliation due to violations of international trade rules. Furthermore, concerns were raised that excessive protectionism could reduce innovation incentives for domestic companies, limit consumer choice, or lead to price hikes due to monopolies. Consequently, opinions were expressed that policy design must carefully balance the urgent goal of protecting industrial foundations with maintaining the free trade order.
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*This content was translated by AI.
