Fuel tax cut lowered to 7%

Cars line up to fill up their tanks at a gas station in Yeongdeungpo-gu, Seoul, ahead of the government's fuel tax relief phase-out scheduled to take effect May 7. / Yonhap

By Park Hyong-ki

The finance ministry said Monday that it will extend a cut on fuel taxes by Aug. 31, but it will be lowered to 7 percent from 15 percent, beginning May 7.

This is part of its phase-out program to normalize the prices of gasoline and diesel.

The 7 percent cut is expected to raise gasoline prices by 65 won per liter, and diesel prices by 46 won. The Cabinet endorsed the cut on April 30.

"We will work with the Ministry of Trade, Industry and Energy and the state-run Korea National Oil Corp. to make sure the prices remain stable," the finance ministry said in a press statement.

On Nov. 6 last year, the finance ministry cut fuel taxes by 15 percent for six months to help ease the financial burden on low- and middle-income earners and small businesses.

The fuel tax is the sum of transportation, energy, environment, mileage, regional and value-added taxes. Each one serves its own purpose, with the government collecting taxes from fuel consumption mainly to develop and maintain roads and improve the environment.

The local gasoline price has been increasing for 10 consecutive weeks, surpassing 1,500 won per liter.

This was in line with the benchmark Dubai crude, which reached $74 per barrel as of the end of April, and is currently hovering around $70, after $52 in January.

Korea reduced the tax rate by 10 percent in March 2008 for nine months to spur private spending. The average gasoline price rose instead then by 3 percent during that period.

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