Korea's bet to lure tourists: tax breaks on breast augmentation

[SEOUL] South Korea is taking duty-free shopping to a whole new level, with plans to exclude face lifts, breast enlargements and liposuction from value-added tax for tourists.

Desperate to boost tourism after an outbreak of Middle East Respiratory Syndrome hurt the economy, the country will give tourists a 10 per cent refund on cosmetic surgery for a year starting April next year.

Mers led to more than a 40 per cent drop in the number of tourists visiting South Korea in June. Visitors from Taiwan and Hong Kong fell the most, by 76 per cent and 75 per cent each from a year earlier.

The number of procedures performed in South Korea covers about about 2 per cent of the population, arguably making the country the cosmetic surgery capital of the world.

Of the more than 4 million such surgeries performed worldwide last year, about 5 per cent were done in South Korea, trailing only the US, Brazil and Japan, according to the International Society of Aesthetic Plastic Surgery.

Now, officials are hoping the tax break will bring in more tourists and boost the economy, although a weaker yuan may be a party pooper for Chinese visitors.

"The tax change should lift the number of Chinese visitors next year, although Korea should really make this permanent to give it a real boost," said Kim Soo Woong, a director at the Korea Health Industry Development Institute.

"The number of medical tourists may fall if the yuan falls further," he said, noting that visitors from Russia and Mongolia dropped when the ruble declined.

Seoul's BK Plastic Surgery, located in the so-called beauty belt of Gangnam alongside hundreds of other cosmetic surgery clinics, offers airport pickups and makes hotel reservations for foreign clients. The clinic has about 20 surgeons and 15 interpreters, speaking languages including Chinese, Japanese and English. The website features messages from Korean celebrities popular in China, including actor Chae Rim.

Korea's gross domestic product grew just 0.3 per cent in the second quarter from the previous three months.

The government hopes to make about 3.5 trillion won (S$4.2 billion), or about 0.2 per cent of GDP, from medical tourism by 2020, up from 726.3 billion won as of 2012, according to the Korea Tourism Organisation.

The number of tourists visiting Korea for medical procedures more than tripled to 266,501 last year from 81,789 in 2010. The tax breaks on cosmetic procedures should boost those numbers further.

BLOOMBERG