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Controversy rising over gasoline tax
By Yoon Ja-young
The government reaped record-high gasoline taxes last year amid increasing consumption. While consumers are demanding that the government cut the tax that makes up a big portion of gas prices, there are others who say that the taxes should be raised especially on diesel fuel to curb air pollution.
According to the Ministry of Strategy and Finance, Monday, the government collected 23.7 trillion won in gas taxes last year, up 8.9 percent from the previous year and a record-high.
For every one liter of gasoline, the government levies 746 won in taxes using diverse names such as "transportation energy environment tax" and "education tax." When adding 10 percent value added tax, consumers pay over 800 won in taxes for every liter, regardless of whether crude oil prices rise or fall. The tax they pay is actually much higher than the price at which refineries supply the gas.
As a fixed tax is levied for each liter, falling prices and increasing consumption thereby means more tax revenue for the government. The gas tax reaped by the government has been increasing, amid growing consumption on low global oil prices.
The revenue increased from 20.9 trillion won in 2014 to 21.8 trillion won in 2015, and to 23.7 trillion won last year. Prices of Dubai crude, meanwhile, have been falling from $96.56 per barrel in 2014 to $50.69 in 2015, and $41.4 last year. The sales of gas increased 3.3 percent to 79.1 million barrels last year, while sales of diesel rose 6.6 percent to 166.8 million barrels. Both marked record high consumption.
However, as taxes came to take a bigger portion of the total price paid at the pump, there has been criticism that the government is reaping huge tax revenues while consumers aren't benefiting much from falling global prices. When a driver fills up with gasoline worth 50,000 won, for instance, 35,000 won goes to taxes.
The recent rebound in oil prices also stirred controversy over gasoline taxes, with consumers demanding that the tax should be slashed to lessen their burden. According to Opinet, an oil price information provider operated by Korea National Oil Corp., gasoline prices at gas stations around the country averaged 1,517 won this month, which compares with around 1,400 won last November.
"There is an imbalance between diverse energies when it comes to taxation. While gasoline and diesel are subject to high tax rates, other products are subject to a low tax rate. In the case of coal, nuclear energy and electricity, no taxes are levied," said Heo Kyung-sun, a fellow at the Korea Institute of Public Finance, in a report. She pointed out that this can lead to distortion in the use of resources.
However, some also demand that the tax should be raised, especially on diesel. Heo said that the current taxation on energy doesn't reflect social costs such as air pollution and global warming.
The government requested research on energy prices, as part of its measures to decrease fine dust. Diesel cars are known as one of main causes of ultra fine dust in the country.
