Lower Oil Tariffs Unlikely to Cut Gas Prices
By Yoon Ja-young
Staff Reporter
The Ministry of Finance and Economy plans to cut tariffs on gasoline and other oil products to help offset soaring international oil prices. The measure, however, is expected to do little in cutting retail gasoline and diesel prices.
It is considering adjusting quota tariffs of imported oil products to 3 percent from the current 5 percent, ministry officials said.
Quota tariff is a kind of flexible duty aimed at increasing or decreasing imports of a certain product. Currently, 30 items including crude oil are enjoying cuts in quota tariffs. Crude oil, for example, has been subject to a 1 percent quota tariff, down from the 3 percent tariff.
The ministry expects the tariff cuts to boost imports of oil products and importers will compete to cut prices, ultimately helping cut retail prices.
``We're considering applying the quota tariff on the oil products to offset the rising international oil prices. They may become cheaper following the price competition between the oil product importer and the local refineries,'' said an official at the ministry.
The ministry discussed the measure with the Ministry of Commerce, Industry and Energy and the Fair Trade Commission last week, but the two parties were lukewarm about the plan, doubting whether the tariff cut will really result in the price competition.
Local refineries which process crude oil after importing it also oppose the plan, saying it should rather give zero tariff on crude oil if it really wants to bring down retail gas prices.
``We will come up with the final plan next week after more discussions,'' the ministry official said.
The government has come under growing calls for cutting oil-related taxes, the key factor behind the steep gains in retail gas prices.
Currently, tax takes around 60 percent of the oil price in Korea, much higher than the 17 percent of the United States and 46 percent in Japan. Oil-related tax has taken around 17 percent of the country's tax revenue during the last ten years, according to the Grand National Party lawmaker Bahk Jae-wan. He estimated that the oil-related taxes collected by the government last year neared 25.9 trillion won, up 10 trillion won from 2000.
Consequently, Korean consumers have paid much higher prices for oil. The gasoline price in Korea was 1456 won per liter as of March, much higher than the United States' 693 won or Japan's 1038 won. The retail price hit 1600 won as of the end of May.