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

The government has decided to further extend the fuel tax reduction measures to help stabilize prices and support the recovery of livelihoods. The reduction of the individual consumption tax on automobiles will also remain in place until June next year.

The Ministry of Economy and Finance announced on December 24 that it has set this policy and will implement amendments to the Enforcement Decree of the Transportation, Energy, and Environment Tax Act and the Enforcement Decree of the Individual Consumption Tax Act starting January 1 next year. This marks the 19th extension of the sunset provision since the temporary fuel tax cut was first introduced in November 2021.

The fuel tax reduction rates for transportation fuels, which were scheduled to end on December 31, will be maintained at 7% for gasoline and 10% for both diesel and liquefied petroleum gas (LPG) butane. As a result, gasoline will continue to be taxed at 763 won per liter, 57 won lower than before the tax cut; diesel at 523 won per liter, 58 won lower; and butane at 183 won per liter, 20 won lower, maintaining the current rates.

The government first introduced the temporary fuel tax reduction in November 2021 to respond to the spread of the COVID-19 pandemic and the sharp rise in international oil prices, and has since extended the measure in increments of two to six months. To stabilize prices, the government expanded the tax cut on gasoline and diesel to 37% starting in July 2022, but has gradually reduced the reduction rate while extending the sunset provision since last year.

This extension takes into account uncertainties in international oil prices. The Ministry of Economy and Finance explained, "This extension is based on the volatility of oil prices and the burden of fuel costs on the public."

The temporary reduction of the individual consumption tax on passenger cars, which lowers the basic tax rate from 5% to 3.5% up to a limit of 1 million won, will also be extended for another six months until the end of June next year.

The temporary 15% reduction of the individual consumption tax on fuels for power generation, such as liquefied natural gas (LNG) and bituminous coal, which was scheduled to end at the end of this month, will also be extended for another six months.

With this extension, the flexible tax rate will apply to power generation fuels at 10.2 won per kilogram for liquefied natural gas and 39.1 won per kilogram for bituminous coal.