South Korea this week is expected to announce a cut in fuel tax to lessen public burden and inflationary pressure from surging oil prices,
Deputy prime minister and finance minister Hong Nam-ki during parliamentary hearing on Wednesday that the government was “seriously considering” adjusting down the fuel tax, contrary to repeated finance ministry’s denial of tax easing.
The cut could be in the similar scope of 2018, industry observers said. When the global crude prices surpassed $70 per barrel in 2018, the ministry lowered oil tax by 15 percent from Nov. 6 in 2018 to May 6 in 2019, and 7 percent from May 7 to the end of August.
According to Oppinet, a fuel price providing website run by Korea National Oil Corp., gasoline prices averaged 1,738 won ($1.5) per liter as of Wednesday in Korea, up more than 90 won from a month ago. Gasoline prices in Seoul also jumped to 1,815 won from 1,724 won over the same time.
The country imposes 745.89 won per liter in oil tax, about 40 percent of the gasoline prices. The 7 percent to 15 percent cut in oil tax would lead to 50 won to 100 won shaving in gasoline charge per liter. The government can lower petroleum tax by up to 30 percent without consent from the National Assembly.
But some expect that such tax cuts would have limited impact given the steeper rise in the international oil prices. U.S. West Texas Intermediate (WTI) rose 52 cents to $82.96 a barrel on Tuesday (local time), the highest since October 2014.
Bank of America recently predicted that the Brent crude benchmark could go up to $100 a barrel if the winter in the Northern Hemisphere proves colder than normal. Goldman Sachs has also revised up its outlook on the Brent crude by $10 to $90.
As the oil price surge is adding concerns to the overall commodity price increase, the finance ministry is considering cutting quota tariff on more than 90 imports including eggs and liquefied natural gas (LNG). It is mulling to temporarily exempt duties on crude and LNG, which are currently subject to 2 percent and 3 percent tariff respectively starting next month, according to sources.
By Baek Sang-kyung, Chun Kyung-woon and Choi Mira
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]