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Transportation Tax and Object Tax Annulment, Empty Talk

Posted October. 04, 2001 08:27,   


Government plans to annul transportation taxes and other `object taxes` are drifting due to differences of opinion.

The Ministry of Finance and Economy (MFE) announced on October 3, ``Although we planned to annul the representative object tax, transportation tax, by January of next year, the agreement between involved ministries such as the Ministry of Construction and Transportation, Ministry of Planning and Budget, Ministry of Government Administration and Home Affairs needs to be fine tuned.`` `Transportation tax annulment` will be implemented by January, 2003 at the earliest.

The MFE had issued the statement in its annual report, ``Following new regulations this Fall, transportation tax will be annulled by next year January and replaced by special consumption tax. Special agricultural tax will be annulled by January, 2003.`` but ended up reneging on the plan.

MFE`s taxation system general consul Han Chung-Ki stated, ``The ministries needed to compile their budgets by June if the transportation tax were to be annulled by next year, but due to difference of views between ministries, they have yet to reach an agreement.``

The MFE has sought to eliminate the transportation tax in order to simplify the tax system and prevent unnecessary spending from enrollment in special accounts, and to replace the tax with a special consumption tax in order to deposit the funds in a regular account.

On the other hand, the Ministry of Construction and Transportation insists on keeping the tax since needed investment in transportation facilities may decline if the tax is annulled. The tax provides 70 percent of the special transportation facility account.

The transportation tax was first implemented in January 1994 and is scheduled to last until December 2003. The elastic tax rate has applied within the range of 150 percent in gas, 20 percent in diesel fuel, and 30 percent of basic tax rate. The transportation tax costs 630 won per liter for gas and 155 won per liter for diesel.

The government tentatively named the plan `tax system simplification regulation plan` and repeatedly announced plans to eliminate object taxes like the transportation tax and consolidate it under the general national tax. However, the plan has failed due to continuing differences in opinion between involved ministries.