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Government extends fuel tax cut with reduced scope until year-end

Published: 23 Oct. 2024, 11:44 Updated: 23 Oct. 2024, 16:07

SHIN HA-NEE
[email protected]

The prices of gasoline and diesel are displayed at a gas station in Seoul on Sept. 29. [NEWS1]

The government has extended the fuel tax cut, originally set to expire on Oct. 31, by two months, until the end of this year.

However, the scope of the reduction will be scaled back, with the current 20 percent cut on gasoline compared to the standard rate decreasing to 15 percent, and the 30 percent cut on diesel and liquefied petroleum gas (LPG) dropping to 23 percent.

This means the fuel tax will rise to 698 won (50 cents) per liter (0.26 gallons) of gasoline, up from the current 656 won and to 448 won per liter of diesel, up from 407 won.

This marks the 12th extension of the fuel tax cut since November 2021, when inflation surged amid the Covid-19 pandemic.

The Ministry of Economy and Finance cited “the recent trend in fuel prices and inflation, as well as [the fuel tax cut’s] impact on the government budget" as reasons for the reduction.

The ministry projected that Korea's tax revenue would fall 29.6 trillion won short of its initial target, following last year's record fiscal deficit of 56.4 trillion won, citing weak corporate earnings.

The managed fiscal balance logged a deficit of 84.2 trillion won in the first eight months of this year, larger than the deficit of 65.8 trillion won in the same period a year earlier.

The reduction rate for the fuel consumption tax was initially set at 20 percent when the cut was first introduced, rising to 30 percent in May 2022. The government raised the rate to a record 37 percent in the latter half of 2022 due to soaring inflation, before adjusting it down to 25 percent for gasoline and 37 percent for diesel and LPG in January. The current rate was set on July 1.

Updated, Oct. 23: Added information on Korea's fiscal balance.

BY SHIN HA-NEE [[email protected]]