South Korea’s fuel tax reductions will be scaled back next month, raising the gasoline tax from 615 to 656 won per liter and the diesel tax from 369 to 407 won per liter. Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok on June 17 said, “The temporary fuel tax cut, originally set to expire this month, will be extended by two months until the end of August, with a slight increase in the fuel tax rate.”
With reduced tax cuts, consumers will face increased prices for gasoline and diesel. Originally set at 820 won per liter, the gasoline tax has been gradually reduced since November 2021 in response to rising global oil prices, with this adjustment marking its 10th extension. The current gasoline tax reduction stands at 25% (205 won per liter), set to decrease to 20% (164 won per liter) in July. The diesel tax cut will decrease from 37% to 30%.
This reduction in tax cuts comes amid recent declines in oil prices and tax revenues. According to the Korea National Oil Corporation, the average gasoline price at gas stations nationwide on June 17 was 1,659 won per liter, down about 27% from a month ago. Assuming gas stations adjust prices in response to reduced tax cuts, the price per liter will be 1,700 won starting July 1.
In response to declining oil prices, the government reduced the gasoline tax cut from 37% at the end of 2022 to 25% last year, and plans further reduction by an additional 5 percentage points. If the downward trend continues, the fuel tax reduction could end within this year. Deputy Prime Minister Choi said, “We will decide in August whether to extend the measure based on the global situation, including geopolitical risks in the Middle East, and the public’s fuel cost burden.”
