SEOUL, Oct. 14 (Korea Bizwire) — South Korea’s government is considering a move to lower the fuel tax rate to alleviate cost pressures felt by small businesses and ordinary people, official sources said Sunday.
The temporary move expected to be announced later in the month may lead to a 10 percent reduction in taxes levied on various refined fuel products such as gasoline, diesel, liquefied petroleum gas (LPG) and butane.
“At present, a 10 percent rate cut is being examined, although 20 percent cannot be ruled out depending on various factors,” an insider, who declined to be identified, said. The measures should go into effect on Nov. 1.
Seoul is contemplating such measures as the average cost for a barrel of crude has surpassed the US$80 mark on the international market, causing domestic prices to rise to the highest levels seen in the past several years.
“The high fuel prices can pose challenges for smaller businesses and ordinary people alike,” he said.
The government has the right to adjust basic tax rates by some 30 percent, with policymakers having already lowered taxes levied on petroleum products for 10 months in 2008.
If 10 percent tax cut is authorized and if such measures are 100 percent reflected on the market, a liter of gasoline that on average costs 1,660 won (US$1.46) at the pumps now will fall 4.9 percent to 1,578 won. Corresponding prices for diesel will fall 3.9 percent to 1,404 won per liter, while LPG and butane costs are expected to decline 2.2 percent each to 904 won per liter.
In the event that Seoul opts to lower the fuel tax by 20 percent, a liter of gasoline should fall to 1,496 won, with diesel dipping to 1,347 won. Prices for LPG and butane would drop to 883 won per liter of gas.
The government, meanwhile, collects some 26 trillion won in fuel taxes every year, with a 10 percent cut translating into 2.6 trillion won less in revenue for the state.