Diesel Oil Tax to Increase by 63 Won In July

Starting July 1, the tax levied on diesel oil will be raised by 63 won per litre. Therefore, customer diesel oil prices will increase from 1,036 won per litre to 1,099 won per litre.

On the other hand, the levied tax on LPG, gas used by taxies, will be decreased by 44 won starting July.

The Ministry of Finance and Economy (MFE) made a legislative notice yesterday of a transportation tax law and special spending tax law revised bill containing the above subjects. It announced that it is planning to implement this starting July through an extra session of the National Assembly.

According to the bill, the MFE will increase the transportation tax rate levied on diesel oil by 0.5 percent every year for three years starting July, and decrease the special spending tax rate levied on LPG by 0.3 percent.

In accordance with the second energy tax system reform bill, the current 100:70:53 relative price rate of gasoline, diesel oil and LPG will be restructured to 100:75:50 this July, 100:80:50 next July, and 100:85:50 in July 2007, respectively.

As a result of this, various taxes levied on diesel oil such as the transportation tax, education tax, mileage tax, and value added tax will increase from the current 486 won per litre to 549 won per litre.

The diesel oil consumer price (1,036 won per litre at the end of April) will increase to 1,099 won in July, 1,152 won next year, and 1,220 won in 2007.

On the other side of the coin, the tax levied on LPG, starting at 344 won per litre, will fall to 300 won in July. The consumer price of LPG will also fall from 686 won to 642 won.

Gwon Hyuk-se, the MFE’s director general for Property, Consumption & International Tax Affairs, said, “Conveyance industries such as bus, freight carriers and cargo boats will be supported by subsidies that cover the whole increased amount, so they will not be affected too much. However, the private driver’s burden will increase.”

Chang-Won Kim changkim@donga.com