Gasoline Tax Up 41 Won, Diesel Tax Up 38 Won... Choi Sang-mok "Adjusting Fuel Tax Reduction Rate"

Gasoline Tax Reduction Rate from 25% to 20% Starting Next Month
Diesel and LPG Butane Tax Reduction Rate from 37% to 30%
"Most Other Countries Have Ended, OECD Also Recommends"

Choi Sang-mok, Deputy Prime Minister for Economic Affairs and Minister of Economy and Finance, is seen speaking at a press briefing held at the Government Complex Sejong on the 17th. Photo by Ministry of Economy and Finance

The government has decided to slightly reduce the rate of fuel tax cuts starting next month. Accordingly, the gasoline tax will increase from 615 won per liter to 656 won, and the diesel tax will rise from 369 won to 407 won. The tax on liquefied petroleum gas (LPG) butane is also expected to increase from 130 won to 142 won.

On the 17th, Choi Sang-mok, Deputy Prime Minister for Economy and Minister of Strategy and Finance, met with reporters at the Government Complex Sejong and stated, “The fuel tax reduction measure, which was scheduled to end at the end of this month, will be extended for two months until August 31,” adding, “We plan to slightly adjust the reduction rate within the range where the fuel burden does not increase significantly.”

According to the policy, the gasoline fuel tax reduction rate will decrease from 25% to 20%, and diesel and LPG butane from 37% to 30%. The fuel tax reduction began in November 2021 to stabilize prices and has been extended nine times. The reduction rate was originally 20%, but it was raised once to 30% in May 2022 and then again to 37% in July of the same year. It was then adjusted to the current reduction rate in January last year.

Deputy Prime Minister Choi explained, “Most countries that temporarily reduced fuel taxes during the sharp rise in international oil prices in 2022 ended their reduction measures before March this year,” and added, “Last month, the Organisation for Economic Co-operation and Development (OECD) also recommended a phased termination.” The OECD announced on the 2nd of last month, when it released South Korea’s economic growth forecast for this year, that direct support for vulnerable groups should be provided rather than fuel tax reductions enjoyed by everyone.

Stabilized oil prices also appear to be one of the reasons. According to the Korea National Oil Corporation’s oil price information system, Opinet, the average retail price of regular gasoline at gas stations nationwide from the 9th to the 13th of this month was 1,654.8 won per liter, marking a decline for six consecutive weeks. Diesel also fell by 13.8 won to 1,483.8 won, recording a decline for seven consecutive weeks. Dubai crude oil, which exceeded $90 per barrel earlier this year, has also stabilized near $80, reflecting stability in international oil prices.

A smaller reduction in the fuel tax rate is expected to have a positive impact on securing tax revenue. National tax revenue from January to April this year was 125.6 trillion won, which is 8.4 trillion won less than the same period last year. It is estimated that the tax revenue lost due to the fuel tax reduction is about 400 billion to 500 billion won per month. However, Deputy Prime Minister Choi avoided answering when asked about the additional tax revenue, saying, “It is not appropriate for the government to comment.”

Regarding the recently controversial inheritance tax and comprehensive real estate tax reforms, Deputy Prime Minister Choi expressed a fundamental stance. The day before, Sung Tae-yoon, the Presidential Office’s Policy Chief, appeared on KBS Sunday Diagnosis and argued that the number of comprehensive real estate tax payers should be reduced and inheritance tax should be drastically lowered to about 30% at the highest. In response, Deputy Prime Minister Choi said, “Basically, I agree with the Yoon Suk-yeol administration’s national philosophy and the basic direction,” but added, “We will gather expert opinions and review the matter in July before making a statement.”