Extension of Oil Tax Subsidies for the Transportation Industry

Freight truck, bus, and taxi service owners will receive government subsidies to defray the entire margin of oil tax increases for gasoline and liquid petroleum gas (LPG) until June 2005.

On June 18, Cheong Wa Dae and the Uri Party convened for a consultative meeting attended by Construction & Transportation Minister Kang Dong-suk and Uri Party’s Chief Policymaker Hong Jae-hyung, and agreed to extend the period for 100 percent subsidization on oil tax increases by a further 12-month period ending in June of next year. Thanks to this decision, the transportation industry will be able to save approximately 486 billion won over the next 12 months.

Originally, the subsidy on oil taxes was to be reduced to 50 percent of the margin of increase as of July 2004.

In an effort to prevent environmental pollution and promote energy conservation, the government has been gradually raising oil tax rates for gasoline and LPG since 2001. It will increase the rates again next month, to 58 won/L and 66 won/L for gasoline and LPG, respectively.

Meanwhile, the Construction & Transportation Ministry has decided to crack down on taxi services that operate by leasing company-owned taxis or on a contract salary system, as well as the illegal transfer of owner-driven taxis.

Wan-Bae Lee roryrery@donga.com