20% Cut in Fuel Tax... 164 Won Off Per Liter

Effective for 6 months from the 12th of next month
Drive 40km a day, save 20,000 KRW per month
GDP down 0.3%... Red light for 4% growth this year

Song Young-gil, leader of the Democratic Party of Korea, is delivering opening remarks at the party-government meeting on price stabilization measures held at the National Assembly on the 26th. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporters Jeon Jinyoung and Jang Sehee] The Democratic Party of Korea and the government have decided to cut the fuel tax by 20% for six months starting from the 12th of next month. This is the largest reduction in fuel tax ever made in response to the sharp rise in oil prices. As a result, the price of gasoline will be reduced by up to 164 KRW per liter, while diesel and liquefied petroleum gas (LPG) butane will have reduction potentials of 116 KRW and 40 KRW respectively.

On the 26th, the ruling party and the government held a price countermeasure meeting at the National Assembly and discussed and announced this plan. With the temporary fuel tax cut, a driver traveling 40 km per day is expected to save about 20,000 KRW per month on gasoline expenses. Initially, the government was considering a 15% reduction plan, but it is reported that the ruling party strongly advocated for a 20% cut. Park Wan-joo, the Democratic Party’s Policy Committee Chair, said at a briefing right after the meeting, "In response to the sharp rise in international oil prices and domestic gasoline prices, we decided to temporarily reduce the fuel tax by 20%. Until yesterday, it was 15%, but during the ruling party-government consultation process, it was changed to 20%, which is a significant change."

In addition, the ruling party and government decided to lower the tariff on liquefied natural gas (LNG) to 0%. They also plan to freeze public utility fees such as gas charges until the end of the year and continue efforts to stabilize living costs by holding discount events for agricultural, livestock, and fishery products.

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, emphasized, "We will swiftly proceed with follow-up measures such as revising enforcement ordinances as soon as possible," and added, "We will do our best to ensure that the annual inflation rate is stably managed in the low 2% range."

Meanwhile, the Bank of Korea announced on the same day that the real gross domestic product (GDP) growth rate for the third quarter of this year (preliminary figure, quarter-on-quarter) grew by 0.3% due to the impact of the fourth wave of COVID-19 and global supply bottlenecks. This has raised concerns about achieving the 4% growth target predicted by the Bank of Korea for this year.