[Stranded Industries, Government Tightening] Why Are Taxes Different for the Same LPG?

Domestic LPG Production Subject to Tariffs + Petroleum Import Charges
Imported LPG Only Subject to Tariffs... "Tax Equity Violated"

[Asia Economy Reporter Park So-yeon] Another burden weighing on the refining industry is the issue of reverse discrimination between imported and domestically produced liquefied petroleum gas (LPG). Currently, domestically produced LPG is subject to a petroleum import surcharge, but this surcharge is not applied to LPG simply imported and distributed from overseas.

Crude oil imports are subject to import tariffs and petroleum import surcharges. Domestic refiners import and refine crude oil to produce and sell LPG. At this time, they pay a 2% tariff on the crude oil import price for LPG production and also pay a petroleum import surcharge of 16 KRW per liter. The tax burden on refiners through this amounts to about 80 billion KRW annually, accumulating to 1.6 trillion KRW.

On the other hand, imported LPG, which is not domestically produced, is only subject to a 2% tariff. There is no petroleum import surcharge. Due to the differential taxation between imported and domestically produced LPG for the same purpose, domestic companies that produce products and create added value in Korea face reverse discrimination compared to importers.

The refining industry points out that the market dominance of imported LPG has strengthened domestically, regulations were relaxed last year to allow the general public to purchase LPG vehicles, and that petroleum products like naphtha maintain fairness between domestic and imported products. Based on these points, they are demanding the removal of the petroleum import surcharge on domestically produced LPG.

The refining industry emphasized, "Since the domestic LPG price is unilaterally led by importers, there is a concern that consumer welfare may decrease, so the petroleum import surcharge should also be removed for domestically produced LPG," adding, "To strengthen the competitiveness of the petroleum industry, it is necessary to prevent preferential treatment of imported products and correct irrational systems."