[Second Half Economic Policy] Restraint on Public Utility Fee Increases... Expansion of Gas Energy Cashback

Ministry of Economy and Finance Announces '2023 Second Half Economic Policy Direction'
"Consumer Price Inflation Slowdown Continues"
Application of Compressed Natural Gas Linked Subsidy

The government plans to minimize public utility fee hikes in the second half of the year and expand energy cashback programs to reduce heating costs, aiming to stabilize prices. These measures are intended to ease the burden on low-income and vulnerable groups.

On the 4th, the Ministry of Economy and Finance announced the 'Second Half Economic Policy Direction' containing these details. They intend to extend tax support primarily for major food items and daily necessities to allow consumers to feel the effects of price stabilization. A ministry official explained, “Consumer prices are expected to continue slowing due to stable raw material prices, policy support effects, and a moderation in service price increases,” but also noted, “There remain burdens such as uncertainties in international raw material prices due to weather conditions and geopolitical risks, as well as some accumulated pressure from fee increases.”

Reducing VAT Burden for Small Restaurants

The government will first refrain from raising public utility fees such as city gas as much as possible during the second half of the year, and if unavoidable, plans to stagger or postpone the timing of increases. A new CNG (Compressed Natural Gas) linked subsidy will be introduced, and the diesel fuel price-linked subsidy will be reinstated (July to August). The diesel fuel price-linked subsidy was introduced to reduce fuel costs for freight trucks, buses, and taxi industries. If the diesel price exceeds the benchmark amount (KRW 1,700 per liter), 50% of the excess amount is subsidized.

In the food and dining sector, cost burdens will be eased to suppress price increase factors. The agricultural product input tax credit system, which is set to expire at the end of this year, is expected to be extended. The government raised the preferential deduction rate for small individual restaurants with annual sales under KRW 400 million from 8/108 to 9/109, and plans to extend this benefit into next year.

Support for Good Price Businesses will also be expanded. Good Price Businesses are individual service providers offering services at prices lower than the regional average. They are designated by the government and local governments and receive incentives worth about KRW 850,000 annually. The government plans to increase the number of Good Price Businesses from the current 6,142 to 7,000 by next year.

Management of import prices for raw materials will also be strengthened. The government will expand the number of raw materials with publicly disclosed import prices from about 80 items, including agricultural, livestock, fishery products, and crude oil, to around 90 items, and will monitor items with rapidly rising import prices.

Expansion of Gas Fee Cashback Amid Winter Heating Cost Concerns

Before the winter season, when heating expenses increase, the government will expand the gas fee energy cashback program. This is a response to a surge in applicants. Previously, a differential refund of KRW 30 to 70 per 1m³ was given for savings of 7% or more; now refunds will be provided for savings of 3% to 5% or more, and the refund amounts will be increased. A ministry official stated, “Detailed plans will be finalized in October.”

Additionally, the Ministry of Economy and Finance is reviewing minimizing the increase in health insurance premiums next year, considering the public burden, health insurance financial conditions, and other social insurance contribution rates. Specifically, this will be decided at the Health Insurance Policy Deliberation Committee meeting in August this year. As a measure to expand low-interest fund supply for vulnerable groups, the annual supply scale of policy-based low-income financial products will be increased by more than KRW 1 trillion.

[Image source=Yonhap News]