Government Extends Fuel Tax Reduction Until the End of February Next Year (Comprehensive)

Concurrent Measures to Reduce Excise Tax on Power Generation Fuel

On the 27th, at the Ministry of Industry Competitiveness Enhancement Meeting held at the Korea Semiconductor Industry Association in Bundang-gu, Seongnam-si, Deputy Prime Minister and Minister of Strategy and Finance Choi Sang-mok is delivering the opening remarks. Photo by Heo Young-han

The government will extend the fuel tax reduction measures, which are scheduled to end at the end of this year, until the end of February next year. The individual consumption tax reduction on power generation fuels will also be extended for another six months to alleviate heating cost burdens.

On the 28th, the Ministry of Economy and Finance announced that the amendments to the Enforcement Decree of the Transportation and Energy Environmental Tax Act and the Enforcement Decree of the Individual Consumption Tax Act, containing these measures, have been pre-announced for legislation and will be implemented from January 1 next year after going through the Cabinet meeting.

Currently, the fuel tax is adjusted with a flexible tax rate, imposing 698 won per liter (L) on gasoline, which is reduced by 122 won (15%). Diesel is taxed at 448 won per liter, down 133 won (23%). Liquefied petroleum gas (LPG) butane is taxed at 156 won per liter, reduced by 47 won (23%).

The government began temporary fuel tax reductions in November 2021 and has continued extension measures, with the 12th extension made last month.

For price stability reasons, the fuel tax reduction rate for gasoline and diesel was expanded to 37% from July 2022, but since last year, the reduction rate has been gradually decreased while extending the sunset date.

This measure considers uncertainties in fuel prices due to Middle East tensions. The Ministry of Economy and Finance stated, "The amendment is a decision made considering the uncertainties in domestic and international fuel prices caused by Middle East tensions and the fuel cost burden on the public."

Additionally, considering the financial conditions of energy public enterprises and the burden of power generation costs, the individual consumption tax reduction on power generation fuels such as liquefied natural gas (LNG) and bituminous coal will be extended for six months until the end of June next year.

To alleviate heating and electricity bill burdens for low-income households during the winter season, the 0% tariff rate on LNG under the quota system will be extended for three months until the end of March next year.

On the same day, Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance, said, "We plan to extend all the reduction measures on fuel tax and individual consumption tax on power generation fuels, which are scheduled to end at the end of the year," adding, "This will help ease the burden of electricity bills, heating costs, and fuel expenses for the public during the winter season, even if just a little."