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Korean gov't to extend fuel tax cuts, individual consumption tax breaks for passenger vehicles

Published: 16 Jun. 2025, 20:48

A gas station in Seoul on June 16 [YONHAP]

The Korean government will extend fuel tax cuts through the end of August and individual consumption tax breaks for passenger vehicles through the end of the year. The measures were announced Monday as part of the government’s response to recent consumer price trends.

Fuel tax reductions will remain at current levels through August. The tax on gasoline will remain reduced by 10 percent, and diesel and liquefied petroleum gas (LPG) by 15 percent. This results in a per-liter tax reduction of 82 won (6 cents) for gasoline, 87 won for diesel and 30 won for LPG compared to precut levels.

The fuel tax cut was first introduced in November 2021 in response to the spread of Covid-19 and rising global oil prices. It was initially intended as a six-month measure but has since been extended 15 times. This marks the 16th extension.

The government decided to extend the fuel tax cut by two additional months in light of the recent conflict between Israel and Iran, which has pushed global oil prices higher and intensified pressure on domestic fuel prices. According to Korea National Oil Corporation’s Opinet price information system, the average price of gasoline in Seoul rose by nearly 10 won per liter from the previous day, exceeding 1,700 won as of Monday afternoon.

The individual consumption tax cut on passenger vehicles — a reduction from the basic rate of 5 percent to a flexible rate of 3.5 percent, with a cap of 1 million won — will be extended by six months, from the end of June to the end of the year. The temporary 15 percent cut to consumption taxes on fuel used for power generation will also be extended to December, aimed at easing upward pressure on electricity prices. Subsidies for fuel price fluctuations applied to diesel and CNG for buses, taxis, and freight trucks will also continue through August.

A consumer looks at watermelons at a supermarket in Seoul on June 16. [YONHAP]

The government also announced measures to stabilize food prices, which have also remained elevated. During the summer break and holiday season, discounts of up to 40 percent will be offered on pork, chicken and fruit. From July 17 to Aug. 6, the weekly discount cap will increase from 10,000 won to 20,000 won. In July, large-scale discount events will offer up to 50 percent off pork, Korean beef and imported beef. A similar event will take place for seafood in June and July, also offering discounts of up to 50 percent.

From July, the government will expand tariff quotas for mackerel, processed egg products and four categories of food ingredients. Through the supplementary budget, it will also support investments related to expanding cage space for laying hens and replacing seaweed dryers — part of a plan to boost productivity and ease upward price pressure.

To stabilize chicken prices, the government will resume the import process for Brazilian chicken on June 21, with distribution planned for mid-August. Starting at the end of July, 4,000 tons of Thai chicken will also be imported.

To prepare for rising prices from poor crop yields of napa cabbage and radish, the government will release its entire stockpile of 30,000 tons — the largest pre-holiday volume ever — before Chuseok. The government also plans to release 5,000 tons of apples and pears. For potatoes, the government will purchase 1,000 tons of domestic stock and is reviewing the import of 1,800 tons under low-tariff quotas.

Additional releases of government-held squid and pollock are planned, and a trial storage program for imported hairtail is under consideration. This year's Chuseok holidays start on Oct. 5 and last until Oct. 9, Hangul Day.

A consumer at a supermarket in Seoul on June 15 [NEWS1]

The government also announced tax relief measures to reduce costs for food companies and curb consumer price growth. Tariff quotas for four imported food ingredients, including canned fruit cocktail, will be extended through the end of December. The supplementary budget includes 20 billion won in low-interest policy loans to support purchases of domestic agricultural products.

“We will strengthen communication with industry players to minimize the number and rate of price increases, delay the timing of hikes, or encourage participation in discount events," said First Vice Finance Minister Lee Hyoung-il.

The Lee Jae-myung administration, launched on June 4, has declared price stabilization its top national policy priority. Although the consumer price index increase rate has hovered around the 2 percent range since the second half of last year, perceived inflation remains high due to cumulative increases over the past three years and persistent price hikes in daily necessities like food and energy.

The government also held an interagency emergency meeting in response to the Middle East crisis and stated that it would act “promptly and decisively in accordance with scenario-based plans if markets show excessive volatility disconnected from economic fundamentals.”

Measures include energy supply management, liquidity support for exporters affected by disruptions in the Middle East and reserved shipping capacity for small and medium-sized businesses. If logistics bottlenecks worsen, temporary vessels will be deployed.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM MIN-JOONG [[email protected]]