Government Weighs Extending Fuel Tax Reduction in Response to Rising Prices and Inflation


SEJONG, Aug. 15 (Yonhap) — The government is considering prolonging a tax relief program on fuel consumption, which is due to end this month, through December, sources said Tuesday, in light of mounting energy costs and high inflation.

According to the sources, the Ministry of Economy and Finance has been evaluating the possibility of extending the measure and plans to announce its decision later this week.

Currently, a 25 percent discount is granted for the purchase of gasoline, and a 37 percent discount is given for diesel and liquefied petroleum gas butane.

The finance ministry is reportedly considering extending the tax cut for gasoline until the end of this year and gradually reducing tax benefits for diesel and liquefied petroleum gas butane.

The idea is being contemplated in the face of escalating energy prices and high inflationary pressure.

As of Thursday, Dubai crude oil price had climbed to US$89 per barrel, an increase of $10 from the average price of $77.20 last December, when the current tax cut rate was determined.

Inflation also remains high, with core inflation, which excludes volatile food and energy prices, rising 3.3 percent on-year in July, though overall consumer price growth slowed to 2.3 percent.

However, the loss of tax revenue may dissuade the government from extending the fuel tax cuts as the government raised a total tax income of 178.5 trillion won (US$133.4 billion) in the first half, down 39.7 trillion won compared with the corresponding figure for last year.

“We plan to decide whether to extend the measure following comprehensive consideration of international energy price trends, oil prices at domestic gas stations and the consumer price situation,” a government official said.

The price of gasoline and diesel at a gas station in Seoul is seen in this photo taken Aug. 15, 2023. (Yonhap)

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