Fuel tax cut extended by two months amid geopolitical uncertainties

Finance Minister Choi Sang-mok speaks at a press conference at the government complex in Sejong on Friday. [MINISTRY OF ECONOMY AND FINANCE]

Korea will extend the tax cut on fuel by another two months as geopolitical uncertainties in the Middle East impact global oil prices.

The tax cut, scheduled to end on Feb. 29, will be extended through April 30 to curb inflation and stabilize domestic oil prices, the Ministry of Economy and Finance said Friday.

The government has applied a 25 percent discount on gasoline and a 37 percent discount on diesel and liquefied petroleum gas.

“Global and domestic oil prices have recently made an upturn, making the tax cut on fuel inevitable,” said Finance Minister Choi Sang-mok in a press conference held at the government complex in Sejong. “The ministry will continuously strive to stabilize prices to prevent inflation expectations from spreading to the economy.”

Dubai crude rose to $79.84 per barrel this month, up from $78.85 in January and $77.33 in December, amid continued geopolitical tensions over the Israel-Hamas war.

The government initiated the tax cut on fuel in 2021 to reduce the inflation burden following the pandemic.

“Inflation this year is projected to move around 3 percent in the first half and stabilize in the low 2 percent range in the second half,” Choi added.

The ministry forecasts the country’s inflation at 2.6 percent this year.

Choo added that the government will announce the details of tax schemes for corporate birth incentive programs early next month.

“We will design a tax scheme that does not place additional tax burdens on corporations and employees for corporate birth incentive programs,” Choo said.

The remarks followed President Yoon Suk Yeol’s instruction to officials last week to devise tax benefits to encourage companies to have birth incentive programs for their workers after local construction firm Booyoung Group announced an initiative to offer 100 million won ($75,000) per child to employees who become parents.

Korea’s fertility rate hit a record low of 0.78 in 2022, far lower than the replacement level of 2.1 needed to sustain the country’s current population.

BY JIN MIN-JI [jin.minji@joongang.co.kr]