Fuel Taxes to Be Slashed 15% Next Month
25 October, 2018
The government has decided to slash fuel taxes to boost the economy for the first time since the global financial crisis in 2008. Fuel taxes will be cut 15 percent for six months from Nov. 6 until May 6 next year, compared to 10 percent a decade ago.
Commenting on the larger-than-expected cut, Vice Finance Minister Koh Hyung-kwon said, "We wanted to make the cut big enough so people really feel the effects and took the state of the national coffers into account."
Fuel taxes are indirect taxes on fuel consumption. Traffic, energy and environmental taxes account for 70 percent of fuel taxes, which also include a driving tax and VAT. The effect will be mostly felt in lower gasoline prices because fuel taxes take up more than half of the consumer price.
If the fuel tax cut is reflected fully, the price of gasoline will fall by W123 per liter, that of diesel by W87 per liter, and that of LPG butane gas by W30 per liter, according to the government (US$1=W1,133).
Previous governments avoided invoking the fuel tax cuts for fear that they will benefit mostly high-income earners who do not need them and because they could increase traffic and damage the environment. Refineries and gas stations could also make a bundle by refusing to reflect the cuts properly in their prices.
But Finance Minister Kim Dong-yeon said, "The adverse effects won't be big because 2,500 cc and larger cars account for a mere 15 percent of all 23 million cars on the roads." He insisted the policy "is intended to benefit low-income people."
The cut is expected to cost tax revenues of some W2 trillion, but the government has already met this year's revenue target.
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