S.Korea Wont Cut Petrol Taxes

February 23, 2016 Taxation in South Korea

Smog Tax KoreaSEOUL – The government of Korea wont reduce the taxes on petrol, despite the fact that they now far outweigh the price of oil in every litre of petrol sold.

On February 22nd the Finance Minister of South Korea Yoo Il-Ho confirmed that the government would not heed public outcry to reform taxes on oil products.

Currently, a large portion of the price of petrol in Korea is made up of taxes, the majority of which are levied at a preset amount, and not pegged to the price of oil or petrol.

The state currently levies KRW 745.89 in tax per litre of petrol sold, additional taxes on the sale of oil based products bring the average tax bill per litre of petrol to as much as KRW 900 per litre.

It has been estimated that the large fixed taxes impede the reduction in the price of petrol to consumers, with a 10 percent drop in global prices estimated to lead to a drop in petrol price of only 1.9 percent.

Civic groups and opposition parties have been calling upon the government to reform the petrol tax system, claiming that the current scheme is not efficient, and a re-jig will help boost economic activity.

However, the Finance Minister said “…under current situation of low oil prices, oil tax cut would cause more negative fallout on tax revenues than positive effect.” and “…it is not appropriate to adjust oil tax under current conditions.”

Photo By: Luke Ma