Gas tax to subsidize transport owners

The surging price of gasoline and diesel fuel on world markets put a financial squeeze on the owners of El Salvador's buses. With the government unwilling to authorize fare increases, the bus owners threatened a nationwide stoppage. That action was averted when the government agreed to negotiate with the transport companies. What resulted was an increase in the subsidy the government pays to keep fare prices low.

The government's decision on how to pay for that subsidy, however, has been widely unpopular in El Salvador. The subsidy will be funded with a 10 cents per gallon gasoline tax. The critics contend that this tax will hurt not only those who own cars, but also the entire society as the increased cost for fuel gets passed on to consumers in the prices of basic items in the household budget.

While it is true that a gasoline tax tends to be regressive (it represents a greater percentage of the income of low income individuals), the real problem facing El Salvador is that it is at the mercy of world oil markets and the falling value of the US dollar. Looking for ways to reduce El Salvador's dependence on oil isn't part of the national debate in the country yet.