S. Korea`s oil tax cut leads to revenue drop of 1.4 tln won: report

SEOUL, Oct. 22 (Yonhap) -- A tax reduction temporarily enforced last year to
reduce gas prices in South Korea resulted in a loss of around 1.4 trillion won
(US$1.2 billion) in tax revenue for the government, a report showed Thursday.
According to the report submitted by the finance ministry to parliament, tax
revenues earned from oil consumption amounted to 13.9 trillion won last year,
down from 15.3 trillion won a year earlier.
The decrease is attributed to a 10-percent tax reduction temporarily enforced
last March until the end of last year as part of efforts to lower overall local
gas prices.
Tax revenue from diesel consumption fell from 6.7 trillion won to 6.3 trillion
won, accounting for the largest share of the shortfall, while that from gasoline
consumption also dipped from 4.9 trillion won to 4.5 trillion won, the report
showed.
The report, however, noted that the tax reduction failed to achieve its intended
objective of lowering gas prices for local consumers, suggesting the measure only
helped fatten the pockets of oil companies and gas station owners.
According to separate research conducted by the government, around 60 percent of
the March tax cut translated into a decline in domestic oil prices but the impact
was short-lived with prices bouncing back only a few weeks after the measure went
into effect.
South Korea, which purchases almost all of its oil needs in overseas markets, is
the world's fifth-largest oil importer.
In July last year, crude oil prices spiked over $140 per barrel, causing concerns
that higher purchasing costs could bring up the consumer prices here. They have
been falling ever since on jitters that demand will decline amid a protracted
global recession.
kokobj@yna.co.kr
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