Korea Unveils Tax Package To Compensate For High Oil Prices

by Mary Swire, Tax-News.com, Hong Kong

10 June 2008

The Korean authorities on Monday announced a temporary KRW10.5tn (USD10bn) tax package, designed to cushion taxpayers against the impact of rising oil prices.

According to a Bloomberg report on the measures, which were announced on Sunday, Prime Minister Han Seung Soo explained that:

"We're facing great difficulty as the world's fifth-largest oil consuming nation while we don't produce a drop of oil. The government will do its best to help reduce the burden from rising oil prices on consumers."

Among the tax breaks unveiled at the weekend, which will be in place between July 2008 and June 2009, are income-tax rebates for workers earning under KRW36mn won per year, and for owners of self-run businesses bringing in less than KRW24mn annually.

Bus and truck drivers, farmers, fishermen and certain other groups will also receive compensation for the oil price increases, although the package has been condemned by bodies representing the transport industry as not going far enough.

Firms which choose to invest in areas related to conserving energy will have their existing tax break increased by 10%, to 20%, according to reports.

It additionally emerged at the weekend that the Korean authorities are considering lowering taxes on various energy products, including diesel, gasoline, and liquified petroleum gas. However, the exact timing and nature of such cuts has yet to be announced.

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