S. Korea temporarily cuts fuel taxes to tackle skyrocketing oil prices

The government of South Korea has reportedly announced that it has cut fuel prices by 20% for six months until April end next year. The tax-cut comes under a bid to ease the impact of skyrocketing oil prices on the nation’s inflation and its citizen’s lives.

According to reports, under the new ruling, the national fuel tax on gasoline has dropped to ₩656 (USD 0.55) per liter, from the earlier ₩820 (USD 0.70), with that of diesel going down to ₩466 (USD 0.40), from ₩582 (USD 0.49).

For the record, fuel taxes account for approximately 40% of the nation’s domestic fuel prices. Industry experts estimate that local gas stations would likely take a few weeks to reflect the decreased taxes in the prices.

Across South Korea, local gas stations are infamous for boosting prices immediately after an international oil price hike while dragging their feet when it comes to lowering prices when crude costs less.

As international oil prices skyrocketed to a near three-year high amid the international economic recovery from the pandemic, the South Korean government, along with its ruling party, President Moon’s Democratic Party, decided to reduce fuel taxes late in October.

On Oct. 18, Dubai crude prices reached USD 83.89 per barrel, up from an average of USD 72.63 in September. This hike severely impacted the country, given that it relies on imports for almost all its energy requirements.

According to data compiled by the state-run Korea National Oil Corporation, the average gas price rose by ₩116 (USD 0.098) to ₩1,810 (USD 1.54) per liter on Thursday.

According to the government's assessment, the fuel tax cut will lower its tax revenue by ₩2.5 trillion (USD 2.1 billion) over the next six months. The move is expected to bring the inflation rate down by 0.33% point.

The country had previously cut fuel taxes by 15% in November of 2018 for six months when oil prices had surpassed USD 80 per barrel. The tax benefits were in effect till August 2019, supposedly being extended for numerous rounds.

Source credit: http://www.koreaherald.com/view.php?ud=20211112000136