As Oil Prices Soar... Europe Introduces Energy Tax Cuts and Windfall Taxes

KIEP Releases Report on 'Expansion and Outlook of Inflation Risks in Europe'

On the 1st, Park Il-jun, the 2nd Vice Minister of the Ministry of Trade, Industry and Energy, visited Mokhwa Altteul Gas Station in Gangseo-gu, Seoul, where the fuel tax reduction rate was expanded from 30% to 37%, and together with the gas station owner, changed the prices to the reduced fuel prices. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Sejong=Reporter Kwon Haeyoung] As energy prices soar due to the Ukraine war and other factors, major governments, especially in Europe, are implementing support policies such as energy tax reductions and subsidies to alleviate the burden on their citizens.

On the 17th, the Korea Institute for International Economic Policy released a report titled "Expansion and Outlook of European Inflation Risks," introducing measures taken by major countries to reduce energy burdens.

Germany is currently implementing a support package worth 43.2 billion euros (approximately 55.9 trillion KRW), which includes energy tax reductions, support for vulnerable groups, and increased taxation on profits of energy companies. This amounts to about 1.2% of its Gross Domestic Product (GDP). Specifically, since January this year, Germany has lowered the renewable energy surcharge applied to electricity bills, provided one-time subsidies to low-income households, and extended loans worth 9 to 10 billion euros to companies affected by economic sanctions on Russia.

France is also pursuing support policies totaling 35 billion euros (about 46.6 trillion KRW), equivalent to 1.4% of its GDP. From February this year until January next year, electricity prices have been reduced from 22.5 euros per MWh to 1 euro for households and 50 cents for businesses, and a one-time subsidy of 100 euros was given to 5.8 million low-income households. A gas price cap system is in place until the end of this year, and the annual increase rate of retail electricity prices has been limited to within 4%.

Some countries have introduced a "windfall tax" targeting energy companies. Italy raised the corporate tax rate on energy companies whose profits increased due to rising energy prices. The United Kingdom taxes 25% of the excess profits of energy companies such as oil and gas firms.

In South Korea, energy tax reduction measures have been implemented starting this month, including lowering the fuel tax to the legal maximum limit of 37%. Fuel-linked subsidies are also being expanded to reduce the fuel cost burden on freight trucks, buses, and taxi industries.

The report stated, "Governments are providing fiscal support to reduce the burden on citizens caused by the sharp rise in energy prices," and predicted, "Direct and indirect support will continue as long as it does not add to inflationary pressures."

This content was produced with the assistance of AI translation services.