Fuel tax cut may be taken to 30 percent from 20 percent
"We are making a final review of an increase in the fuel tax cut," Finance Minister Hong Nam-ki said Thursday. "We plan to announce our final decision on April 5 after the ministers meeting on consumer prices, which will include additional measures including expanding the number of items for which tariffs will be lowered."
Hong stressed increasing risks caused by external factors, including the crisis in Ukraine, higher inflation and supply bottlenecks globally.
"Especially, the rising energy prices, including the international crude price, as well as raw material prices are intensifying upward pressure on consumer goods prices both home and abroad," Hong said.
A liter of gasoline would be taxed 574 won ($0.47) if the tax cut were 30 percent. The current tax is down 246 won per liter from the normal rate and 82 won less than the tax rate with the 20-percent cut.
On Nov. 12, the fuel tax was cut by 20 percent, reducing the cost by 164 won per liter — gas is taxed at 820 won per liter.
Between November 2018 and May 2019, the government temporarily cut fuel taxes 15 percent as crude rose above $80 per barrel. The cut was reduced to 7 percent for an additional three months.
The current program was to end in April. In early March, the government announced plans to extend the program for another three months.
The latest decision was triggered by soaring fuel prices.
Average prices at gas stations nationwide recently exceeded 2,000 won per liter, the first time above that level since 2012.
Although it recently dipped back to 1,998.52 won per liter, the price is still up 30 percent on year.
Rising fuel prices have become a major concern not only for retail consumers but also for businesses, including commercial truckers.
Diesel prices are at their highest levels since 2008. One liter of diesel costs 1,919 won. At some of the gas stations, diesel is more expensive than gasoline.
The recent spike in diesel prices was largely due to demand in Europe, which relies on Russian imports.
It is estimated that roughly 60 percent of diesel consumed in Europe is imported from Russia.
The Korean Public Services and Transport Workers' Union recently said that high diesel prices unfairly burden truck drivers.
"Fuel expenses take up more than 30 percent of transportation cost," the union said in a statement. "The rise in fuel prices is seriously threatening the livelihoods of truck drivers."
"The average net income of a driver is roughly 3.4 million won," the union argued. "If they are spending 1 to 3 million won for fuel, they have no income."
It's not just fuel prices that are going up.
The government on Thursday announced that it will be raising natural gas prices due to the rise in international energy prices.
The Ministry of Trade, Industry and Energy on Thursday said the price of city gas used by households and for small businesses will be raised an average 1.8 percent starting April.
The price of gas used at homes for cooking and heating will be raised 3 percent, while the price of gas used for small businesses will be raised between 1.2 and 1.3 percent.
With the change, an average household will pay an additional 860 won per month.
This is the first change since June 2020. The government at the time lowered household gas prices by 11.2 percent.
BY LEE HO-JEONG [firstname.lastname@example.org]