Soaring Oil Prices... Government Expands Fuel Tax Cut from 30% to 37%

Government Announces at 1st Emergency Economic Ministers' Meeting on 19th
Fuel Tax Cut Expansion Likely to Have Minimal Perceived Effect

On the 12th, at a gas station in downtown Seoul where oil prices are continuously rising, gasoline is being sold at 2,965 won per liter and diesel at 2,990 won per liter. Photo by Moon Honam munonam@

[Asia Economy Sejong=Reporter Kwon Haeyoung] As oil prices soar, the government is expected to announce a plan to reduce the fuel tax cut rate to the legal maximum limit of 37%. The fuel tax is expected to decrease by 57 won per liter (L) compared to the current rate. However, even if the government proceeds with an additional fuel tax cut, the consumer's perceived effect is unlikely to be significant, leading to calls for considering a temporary 100% fuel tax cut.

According to the Ministry of Economy and Finance on the 18th, the government is reviewing a plan to extend the temporary 30% fuel tax cut, which was supposed to operate until the end of July, until the end of this year, while adjusting the flexible tax rate to expand the fuel tax cut rate to 37%.

The fuel tax is a tax imposed on gasoline, diesel, etc. It is the sum of the transportation energy environment tax, education tax (15% of the transportation tax), and driving tax (26% of the transportation tax), plus a value-added tax (10%).

Before the fuel tax cut, the government imposed 820 won per liter on gasoline. As international oil prices rose at the end of last year, the government initially cut the fuel tax by 20%, then further reduced it to the legal limit of 30% at the beginning of this year. Currently, the fuel tax is 573 won per liter for gasoline, which is 247 won lower than before the reduction (820 won). If the government lowers the fuel tax to 37%, it will decrease by an additional 57 won from the current 573 won per liter.

The government is reportedly set to finalize and announce the additional fuel tax cut plan at the first emergency economic ministers' meeting chaired by Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho as early as the 19th. This is a follow-up measure after President Yoon stated, "Since the price increase factors come from the supply side, the government will take all possible measures on the supply side."

The problem is that even if the fuel tax is cut to 37%, the consumer's perceived effect is expected to be minimal. As of the 17th, the diesel price exceeded 2,100 won per liter, standing at 2,104.2 won. Gasoline prices are 2,098.45 won per liter.

An official from the Ministry of Economy and Finance said, "The problem is that the fuel tax has already been reduced as much as possible, so the perceived effect is small," adding, "The government has almost exhausted all usable cards related to the fuel tax."

Accordingly, there are voices calling for considering a temporary 100% fuel tax cut. Currently, Seobyeongsu, a member of the People Power Party, has proposed the 'Transportation·Energy·Environment Tax Act Amendment' and the 'Individual Consumption Tax Act Amendment' to allow a 100% reduction of the fuel tax.

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