The ruling party and the government are pushing to abolish handling fees that agricultural cooperatives charge on tax-free fuel. The move comes as surging tax-free fuel prices driven by the Middle East crisis have raised concerns that even the 2% fee could add to the financial burden on farmers.
An official from the Democratic Party of Korea's Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee said Wednesday that the party "decided to receive a report from the National Agricultural Cooperative Federation (Nonghyup) and the Ministry of Agriculture, Food and Rural Affairs on plans to improve the system, including abolishing the tax-free fuel handling fee, and make a final decision."
Under the current system, the handling fee on tax-free fuel is capped at 2% of the supply price. The problem is that as crude oil prices have risen due to the Middle East crisis, the handling fees have also surged in tandem. In response, farming organizations including the Korea Young Farmers Association have conveyed criticism to lawmakers on the National Assembly's agriculture and oceans committee, arguing that "the purpose of tax-free fuel is to ease the burden on farmers, and the handling fee runs counter to that purpose." Approximately 100 of the roughly 2,000 local agricultural cooperatives are known to impose the handling fee.
The ruling party and the government are now pushing to abolish the handling fee collected by only some local cooperatives. To this end, they are reviewing amendments to the Ministry of Agriculture, Food and Rural Affairs' official notice that serves as the legal basis for the fee, as well as the Restriction of Special Taxation Act. According to the ministry's notice on the supply and management of tax-free fuel for agricultural use, the chairman of Nonghyup's central office may establish a central tax-free fuel management committee to deliberate on matters related to fees. Article 106, Paragraph 2 of the Restriction of Special Taxation Act also stipulates that fees may be collected to cover costs associated with issuing tax-free fuel purchase cards, maintaining management ledgers and processing data electronically.
Demands to abolish the tax-free fuel handling fee have been raised consistently. The Anti-Corruption and Civil Rights Commission also proposed in 2021 that the provision serving as the basis for Nonghyup's collection of the handling fee be deleted so that the tax exemption benefits reach farmers as originally intended.
In addition, the ruling party and the government have decided to pursue government budget support for expanding the supply of tax-free fuel. An official from the agriculture and oceans committee explained that "the government is reviewing methods including direct government support and indirect support through agricultural cooperatives."