SEOUL - South Korea, the world's fourth-biggest crude oil buyer, said on Monday it plans to raise a domestic transport tax on diesel by 14.4 percent in July as part of efforts to curb air pollution.

The rise is in line with the government's medium-term plan to bring the domestic retail price of diesel to 85 percent to that of gasoline by July 2007, the finance ministry said in a statement. Diesel is less environmentally friendly than gasoline.

According to the plans, which are subject to parliamentary approval in June, transport tax on diesel would rise by 46 won per litre to 365 won from July 1 this year, the ministry said.

The tax hike would result in a 6.5 percent rise in retail price of the fuel to 1,025 won per litre, based upon an average price for the past six months, it said.

The government would raise the transport tax by 39 won per litre in July 2006 and again by 50 won per litre in July 2007 to meet the medium-term goal, it said.

To help ease financial burden of truckers and bus operators, the government would fully cover the amount of diesel price increases through a subsidy for the next three years, it said.

Meanwhile, Seoul would cut a special consumption tax on liquefied petroleum gas (LPG) and Butane by 35 won to 210 won pre litre effective July 1, bringing the retail price of the fuels to just 50 percent of that of gasoline, the ministry said.

The tax cut would see the retail price fall to 686 won per litre from 730 won now, it said.

Source: http://www.planetark.com/dailynewsstory.cfm/newsid/30663/story.htm