Korea to expand fuel tax cuts amid surging energy prices
gettyimagesbank
Korea will expand a tax cut on fuel consumption as part of efforts to ease inflationary pressure that has been building up amid surging energy prices, the country's top economic policymaker said Tuesday.
The government will expand the cut from the current 20 percent to 30 percent from early May to the end of July as the Russia-Ukraine war has sent crude oil and other commodity prices higher, Finance Minister Hong Nam-ki told an anti-inflation meeting.
The decision came as Korea's consumer prices grew 4.1 percent in March from a year earlier, the fastest price growth in more than 10 years. In particular, the prices of oil-related products jumped 31.2 percent over the cited period.
"At a time when concerns are being raised that inflationary pressure will be persistent for the time being, the issue of inflation is more important and graver than any other pending problems," Hong said.
Korea has been grappling with growing inflation pressure driven up by global supply chain disruptions, and soaring oil and commodity prices caused by the Russian invasion of Ukraine.
The price of Dubai crude, Korea's benchmark, stood at $111 per barrel on average in March, up about 20 percent from a month earlier.
In the last week of March, gasoline prices at local gas stations exceeded 2,000 won ($1.65) per liter, a large portion of which was government tax.
In early March, the government extended the current 20 percent tax cut for an additional three months until the end of July as the temporary tax reduction scheme was set to expire at the end of April.
A 30 percent fuel tax cut translates to a reduction of 574 won per liter of gasoline at the pump.
Tuesday's decision came after the transition team of President-elect Yoon Suk-yeol requested the tax cuts be further expanded to help ease the burden on consumers from rising energy costs.
The government earlier estimated the three-month extension of a 20 percent fuel tax cut will likely reduce tax revenue by 1.4 trillion won. The transition team projected that a 30 percent tax cut would cause tax revenue to fall an additional 700 billion won. (Yonhap)