Choo Kyung-ho: "Extension of Fuel Tax Cut Until October... Considering the Rise in International Oil Prices"

Gasoline -25%, Diesel -37%

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho announced on the 16th that "considering the rising trend of international oil prices, the fuel tax reduction measure will be extended for two months until the end of October."

Deputy Prime Minister Choo made this statement during a press briefing held at the Ministry of Economy and Finance press room on the same day. He explained, "By extending the fuel tax reduction measure for two months until the end of October, we plan to cushion the burden on the public caused by rising oil prices."

As the government extends the fuel tax reduction measure, which was scheduled to end at the end of this month, the current tax rates of 615 KRW per liter (25%) for gasoline and 369 KRW per liter (37%) for diesel, which had a larger reduction, will be maintained. The government initially considered extending the reduction measure until the end of this year but decided to limit it to two months first and then reassess based on external conditions such as international oil prices.

Deputy Prime Minister Choo stated, "The application of the flexible tax rate, which further reduces the basic fuel tax rate, expires at the end of August. Recently, international oil prices have been rising, and the burden on the public is gradually increasing," explaining the background of the extension measure.

Analysis suggests that the government's decision to extend the fuel tax reduction for two months was made in consideration of the soaring international oil price trend. On the 15th (local time) at the New York Mercantile Exchange, West Texas Intermediate (WTI) crude oil was priced at $80.99 per barrel, a 9.22% increase compared to a month ago ($74.15). Dubai crude oil, which serves as the benchmark for oil imported into Korea, also surged 9.6% to $86.39 from $78.83 during the same period. Consequently, the average domestic gasoline retail price rose 9.4% to 1,729.38 KRW per liter compared to 1,580 KRW a month earlier.

Since the sharp rise in oil prices can directly contribute to consumer price inflation, the government plans to prevent this in advance. However, the burden of reduced tax revenue due to the extension of the fuel tax reduction remains. National tax revenue in the first half of this year was 178.5 trillion KRW, down 39.7 trillion KRW compared to the same period last year. Among this, the transportation energy environment tax, which includes fuel tax, was 5.3 trillion KRW, a decrease of 700 billion KRW (11.9%) compared to the previous year. It is judged that the repeated fuel tax reduction measures have partially contributed to the decrease in tax revenue.