Seoul considers cutting fuel taxes to aid consumption amid high oil prices

The Korean government is mulling a temporary gasoline tax break - which would be the first in 10 years - as early as November 1 to alleviate consumer burdens from jump in oil prices against deteriorating domestic demand, a top economic official said on Sunday.

"The government is in discussion with related ministries over a temporary fuel tax cut,” Deputy Prime Minister and Finance Minister Kim Dong-yeon told reporters during his visit to Indonesia for a meeting of G20 finance ministers and central bank governors.

A cut of 10 percent in taxes on diesel and gasoline could bring down retail prices 4 percent and 5 percent respectively as various taxes including 26-percent value-added tax make up for more than half of the fuel charges.

The government struggling with worsening domestic conditions has studied the measure as the average cost for a barrel of crude has surpassed the $80 mark in the international market, posing additional challenges for smaller businesses and ordinary people alike amid slowdown in the economy, he said.

The tax reduction rate can reach up to around 20 percent depending on various factors. If a 10 percent tax cut is authorized, a liter of gasoline that on average costs 1,660 won ($1.46) at the pumps will fall by 82 won or 4.9 percent to 1,578 won. The corresponding price for diesel will fall 3.9 percent to 1,404 won per liter.

The government implemented a 10 percent gas tax cut for 10 months from March 10, 2008, when the global financial crisis weighed down the economy.

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