Gasoline price to rise by 99 KRW per liter next month... Reduction in fuel tax cut size

Reduction in Gasoline Fuel Tax Cut Narrowed... 37% to 25%
Price Expected to Rise by About 99 Won per Liter... Measures to Prevent Hoarding
Extension of Vehicle Acquisition Tax Cut... Tax Rate Maintained at 3.5%

This week, gasoline dropped by 42 won and diesel by 49 won... Diesel prices fall to the 1,700 won range for the first time in 9 months
(Seoul=Yonhap News) Reporter Ryu Hyorim = This week, the retail prices of gasoline and diesel at domestic gas stations continued to decline. Diesel prices fell to the 1,700 won range for the first time in about 9 months. According to the Korea National Oil Corporation's oil price information system Opinet on the 17th, the average retail price of gasoline nationwide for the second week of December (11?15) was 1,568.9 won per liter, down 42.2 won from the previous week. The photo shows a gas station in downtown Seoul on the 18th. 2022.12.18
ryousanta@yna.co.kr
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[Asia Economy Sejong=Reporter Lee Jun-hyung] The government will extend the fuel tax reduction policy until April next year. However, the reduction rate for gasoline fuel tax has been reduced from the existing 37% to 25%. Gasoline prices are expected to rise by about 99 won per liter (ℓ). The government also decided to extend the reduction of the individual consumption tax on automobiles until June next year to stimulate domestic demand.

On the 19th, the Ministry of Economy and Finance announced the '2023 First Half Individual Consumption Tax Flexible Rate Operation Plan' containing these details. The government first decided to extend the fuel tax reduction measure for four months, from the end of this year to the end of April next year. Previously, as part of measures against high inflation, the government reduced the fuel tax by 20% starting November 12 last year, and then expanded the reduction rates to 30% and 37% in May and July this year, respectively. A Ministry of Economy and Finance official explained, "This measure was decided after comprehensively considering recent oil price trends, inflation conditions, and the public's fuel cost burden."

Consideration of Gradual Reduction in Fuel Tax Cut

However, the government reduced the gasoline fuel tax cut rate from the existing 37% to 25%, a 12 percentage point decrease. This was in consideration of the fact that domestic gasoline prices have remained relatively stable compared to other fuel types such as diesel. Since the government implemented the largest-ever fuel tax cut in July, it is also reportedly considering a plan to gradually reduce the cut rate in several stages.

With the gasoline fuel tax cut rate decreasing from 37% to 25%, the price reduction is expected to decrease from 304 won to 205 won, a reduction of 99 won. However, for diesel and liquefied petroleum gas (LPG) butane, which maintained the 37% fuel tax cut rate, the price reduction effect remains the same at 369 won and 130 won, respectively.

To prevent hoarding and speculative acts using the gasoline price increase, the government also implemented the 'Notice on Prohibition of Hoarding of Petroleum Products' on the morning of the same day. Accordingly, the gasoline shipment volume by petroleum refiners this month is limited to 115% compared to the same period last year. Acts such as avoiding gasoline sales without justifiable reasons or excessive shipments to specific companies are also prohibited. The Ministry of Economy and Finance stated that it will thoroughly manage hoarding acts arising from this measure in cooperation with the Ministry of Trade, Industry and Energy, the National Tax Service, and the Customs Service.

Extension of Individual Consumption Tax Reduction

The reduction measure for the individual consumption tax on passenger cars has been extended by six months. Since July 2018, the government reduced the passenger car individual consumption tax rate by 30%, from 5% to 3.5%. From January to February 2020, the tax rate was restored to 5% for two months, but when the COVID-19 pandemic broke out, a 1.5% rate was applied from March to June of the same year to stimulate domestic demand.

Afterwards, the government maintained the passenger car individual consumption tax rate at 3.5%. Initially, the government planned to implement the reduction measure until the end of this month. This was because the government had projected next year's tax revenue on the assumption that the individual consumption tax would be restored to the normal rate (5%). However, this measure is believed to have been influenced by the increasing cases where consumers who signed vehicle purchase contracts during the tax reduction period could not receive the discount benefits due to delivery delays, as well as the possibility that automobile consumption capacity may shrink due to the economic downturn.

The government also decided to maintain the individual consumption tax reduction (15%) on power generation fuels until June next year. This is because prices of power generation fuels such as liquefied natural gas (LNG) and thermal coal have soared due to global supply chain instability. In fact, LNG prices increased by 58.51%, from $18.8 per MMBtu (million British thermal units) last year to $29.8 in October this year. A government official explained, "Through this measure, it is expected that the pressure to raise public utility rates caused by the accumulated burden of power generation costs can be partially alleviated."

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