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| Gasoline prices are seen at a local gas station in Seoul, Friday. / Yonhap |
Gov't expected to unveil tax cut plan this week
By Anna J. Park
The government is mulling over a temporary tax cut on fuel, following a recent rally in global oil prices and with OPEC resisting calls for an increase in supply.
According to related ministries, the government is expected to announce the tax cut Tuesday after they are confirmed at a pan-governmental meeting presided over by Minister of Finance Hong Nam-ki earlier in the day.
The finance ministry has officially confirmed a cut in fuel taxes, but hasn't disclosed any specific details, saying the measures had yet to be confirmed.
However, observers expect the government to cut the current tax by at least 15 percent, given past precedents. The government previously cut the fuel tax temporarily by between 7 and 15 percent; although the legally-permitted limit for such reductions stands at 30 percent.
Those who forecast the government to introduce a 15 percent cut say anything lower will be insufficient, as global oil prices have already reached a three-year peak and the Korean won has weakened against the dollar. Some are even forecasting a 20 percent cut.
As of Sunday, the price of WTI Crude for November contracts was $83.76 a barrel, while the Brent Crude price stood at $85.53. These oil prices reflect a decrease from earlier in the past week, after they exceeded a three-year high of over $86 a barrel, amid tight global supply.
A 15 percent cut in the fuel tax will lower prices by 123 won ($0.10) per liter for gasoline ― the average nationwide price Oct. 3 was 1,732 won per liter.
If the measure is announced this week, the tax cut is likely to go into effect from as early as mid-November, considering the legal procedures required. The temporary reduction is expected to continue until next March or April.
Meanwhile, the government is also reviewing removing the current 2 percent quota tariff on imports of liquefied natural gas (LNG) from next year, to prevent any hikes in domestic gas prices.
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