[First Livelihood Measure of Yoon Administration] The First Initiative Eases 'Shopping Basket Prices'... Zero VAT on Coffee and Processed Food Products

[Asia Economy Sejong=Reporter Kim Hyewon] The first livelihood measure of the Yoon Seok-yeol administration focused on alleviating the price burden of the "common people's shopping basket." The intention is to support the livelihood economy by lowering the import costs of daily necessities such as pork, cooking oil, and coffee, thereby increasing the real purchasing power of low-income groups.

On the 30th, at the Economic Ministers' Meeting chaired by Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho, held for the first time under the Yoon administration, the "Emergency Livelihood Stabilization 10 Major Projects for the Stability of Common People's Lives" were announced, focusing on three major areas: food, living expenses, and housing. The government’s diagnosis is that the rising prices of imported raw materials and processed foods are rapidly spreading to overall living costs, and amid high inflation and a trend of interest rate hikes, the burden of living and housing costs on low-income households is increasing.

The government first decided to apply zero tariffs to 14 items centered on food and industrial raw materials. For seven food raw materials such as cooking oil and pork, which have recently faced strong price pressures, an additional zero tariff quota will be applied until the end of the year, and the quota volume will be expanded. For seven industrial raw materials, including naphtha, which have significant industrial ripple effects or rising prices, the quota and adjusted tariffs will be applied and reduced until the end of the year, with the application period extended. For example, for pork priced at $1,000, applying zero tariffs reduces the import price from 1,563,000 KRW to 1,250,000 KRW.

The government also introduced a value-added tax (VAT) exemption card, which has a strong effect on lowering consumer prices. VAT on imports of coffee and cocoa beans, which are popular food items, will be temporarily exempted until next year, reducing costs by about 9%. Importing coffee beans priced at $1,000 without VAT can reduce prices by approximately 9.1%. Additionally, the exchange rate applied when determining the taxable price for customs duties will be changed from the "foreign exchange selling rate" to the "base exchange rate," reducing import costs by about 1%.

VAT (10%) on simply processed food products individually packaged in bottles and cans, such as kimchi, doenjang (soybean paste), gochujang (red chili paste), soy sauce, and salted seafood, will also be exempted until next year to induce price reductions. The inflation rates for kimchi and doenjang last month were 10.6% and 16.3% year-on-year, respectively, factors that increase the burden on the common people's shopping basket. A budget of 60 billion KRW will also be invested to expand support for discount coupons for agricultural, livestock, and fishery products (10,000 KRW per person, up to 20% discount).

Not only consumers but also producers’ raw material cost burdens will be reduced to lower price increase pressures at the distribution stage. The government will support 70% of the wheat price increase to minimize price hikes and provide low-interest loans at 1% for feed purchase costs for livestock farmers. The tax exemption deduction limit for duty-free agricultural products will be raised by 10 percentage points until the end of next year. For fishery workers’ duty-free diesel, a fuel price-linked subsidy will be temporarily provided for five months.

To reduce living expenses, the interest rate on student loans for the second semester will be frozen at 1.7%, the same level as the first semester, and the 30% reduction in individual consumption tax on passenger cars will be extended for six months. Additionally, to ease communication costs, the government plans to encourage the launch of a 5G mid-tier plan in the third quarter. A 20 trillion KRW-scale safe refinancing loan for low-income households will be prepared to convert high-interest and variable-rate mortgage loans into low-interest and fixed-rate loans, and emergency living support funds of up to 1 million KRW per low-income household (for a family of four) will be newly provided.

Yoon In-dae, acting director of the Economic Policy Bureau at the Ministry of Economy and Finance, said, "(The new government) will move away from price control-centered inflation management and strengthen market-friendly policy responses such as supporting cost reduction efforts," adding, "We will strengthen continuous monitoring of major items such as daily necessities and raw materials and respond promptly if abnormal trends occur." He continued, "We will also pursue structural improvements in prices at the government-wide level through supply chain management by sector, advancement of distribution logistics, and establishment of a fair economic order."

This content was produced with the assistance of AI translation services.