Korea mulls bigger fuel tax cut

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A view of a gas station in Seoul on Monday (Yonhap)

SEJONG — Economic policymakers are reportedly devising measures to ease the burden on households and micro-business owners as domestic gasoline and diesel prices surged following soaring international fuel prices. crude oil.

One of the main interests of the market is whether the Ministry of Economy and Finance will decide to extend the fuel tax reduction rate from the current reduction.

A finance ministry official was quoted by a media outlet on Wednesday as saying the government is “considering a review of the fuel tax reduction range”.

Alongside the official, other unnamed officials via media interviews have not ruled out the possibility of widening the range of tax cuts in the coming days or weeks.

While the government has implemented a 20% fuel tax reduction as a contingency plan, the reduction range may be increased by 5 to 10 percentage points, depending on the upcoming decision of the authorities. decision makers.

Market insiders are also pinning their hopes on the possibility that car owners will benefit from a 25 or 30 percent fuel tax cut in the coming weeks. They refer to the situation involving the Russian invasion of Ukraine and the growing global demand for petroleum products.

Other possible measures include fuel subsidy and fuel reimbursement for the lower income bracket and the self-employed.

Under an introduction of the fuel subsidy, a certain portion of households would receive a portion of the increases in electricity, gas and water bills – as a result of rising fuel prices – from the government. The fuel reimbursement system is a kind of tax reimbursement for employees or self-employed persons with low incomes.

On Tuesday, Kwon Young-se, vice chairman of the presidential transition team, said that “it is necessary to consider developing support measures for households and self-employed people, because there are strong chances that a spike in oil prices will continue.”

He told transition team staff members that among the pressing and important issues are energy and oil prices.

According to the Korea National Oil Corp., the benchmark gasoline price in the country stood at 1,999.67 won ($1.65) per liter on Wednesday.

This marked an increase of around 30% in just one year, given that the price was 1,500 to 1,560 won per liter in the first half of 2021.

During the corresponding period, the benchmark diesel price also rose sharply, from around 1,450 won to 1,919.89 won per liter.

International crude oil prices are still hovering above $100 a barrel. Dubai crude, which makes up the bulk of Korea’s oil imports, traded at $110.55 on Tuesday.

The surge in international prices of raw materials, including petroleum products, which has affected the country’s producer and consumer prices, is generating inflationary pressures.

Consumer prices in Korea have posted an annual growth of around 3% for five consecutive months, including a growth of 3.7% in February.

By Kim Yon-se ([email protected])

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