Gov't fights back against fuel costs with tax cuts, subsidies

Finance Minister Choo Kyung-ho, right, discusses various emergency measures during a meeting held at the Government Complex in Jongno District, central Seoul, on Sunday. [YONHAP]

In a move to fight surging fuel costs and inflation, the government announced Sunday it will expand fuel tax cuts and diesel subsidies.

Starting July 1, the fuel tax cut will be increased to 37 percent from the current 30 percent to help those struggling from surging international fuel prices. The current fuel tax cut was to expire at the end of July, but was instead both increased and extended until Dec. 31.

The 37 percent tax cut is the highest the government can go based on the law.

The decision, along with other emergency support measures, were announced by Finance Minister Choo Kyung-ho.

When the tax cut is applied, gasoline will be taxed 516 won (40 cents) per liter, down 9.9 percent or 57 won from the current cut. Diesel will be taxed 369 won per liter, down 9.3 percent or 38 won. Liquefied petroleum gas will be taxed 130 won per liter, down 8.5 percent or 12 won.

The government expects the change to lower drivers' fuel costs by an average 7,000 won per month.

“The government will talk with oil companies so the fuel tax cut can be quickly reflected in actual fuel costs,” said Choo. “We will encourage gas stations directly operated by oil refiners to immediately lower fuel costs when the tax cut is implemented and those not directly run by the companies to lower costs within two weeks.”

The diesel subsidy will be expanded as well.

Currently, the government pays for 50 percent of diesel costs past the 1,750-won-per-liter mark for those who drive commercial vehicles, buses and taxis. The trigger price will be lowered to 1,700 won between July 1 and Sept. 30. This means that if a gas station charges 2,000 won per liter for diesel, the government will pay for half the amount exceeding 1,700 won, or 150 won per liter.

Water bills, train fares, highway tolls and postal fees will be kept frozen in the second half of 2022, though electricity bills will rise. However, Finance Minister Choo said the electricity bill hike will be "kept to a minimum" at the meeting on Sunday.

The Korea Electric Power Corp. requested the government allow it to raise electricity bills for the third quarter, as the company was suffering from huge losses. It reported a net loss of 6.48 trillion won in the first quarter, compared to a net profit of 118.4 billion won in the same period the previous year. It logged revenue of 16 trillion won, up 9.1 percent on year.

The current 3-percent tariff quota on imported jet fuel for domestic flights will temporarily be removed between August and December.

Choo also announced he will aim to pass an amendment to the Restriction of Special Taxation Act at the National Assembly to allow bigger tax deductions for credit card spending, specifically for public transport fares.

If the amendment is passed, income tax deduction rates for public transport fees will be increased to 80 percent, compared to the current 40 percent, until end of this year.

BY LEE TAE-HEE [lee.taehee2@joongang.co.kr]