Corrects gasoline prices to taxes in paragraph 3
South Korea has extended its consumption tax cut scheme — scheduled to end this month — until the end of April 2023, although the tax cut for gasoline will be reduced considering relatively stable domestic gasoline prices compared to other fuels.
South Korea will extend its fuel tax reduction policy by four months to encourage consumption, the country's ministry of economy and finance announced on 19 December, alongside other changes to the policy. The extension will see tax cuts for fuels such as gasoline and gasoil, previously slated to end this month, last until the end of April 2023 instead.
But the tax cuts for gasoline will be reduced from the current 37pc to 25pc, as domestic gasoline prices have been relatively stable, compared to other types of fuel such as diesel, the ministry said. The move will increase gasoline taxes from the current 516 South Korean won/litre ($0.40/l) to W615/l, although this is still lower than the W820/l before the tax cuts were implemented.
The government will also extend the individual consumption tax reduction for automobiles by six months. The 30pc exemption in individual consumption tax for passenger cars, also scheduled to end this month, will be extended until the end of June next year to stimulate demand for passenger cars.
The extension of a 37pc tax cut on diesel comes as gasoil prices have continued to remain elevated, despite coming off record highs in June. Asian gasoil margins — or the Singapore 10ppm sulphur gasoil swap against Dubai crude — have averaged about $35/bl so far this month. This is more than triple last year's average gasoil margins, and still more than double the pre-pandemic December 2019 average of about $15/bl.
The move will likely help sustain the country's domestic consumption, with South Korea's domestic diesel consumption up by around 15pc on the month to 14.5mn b/d in October, latest data from Korea Monthly Oil Statistics show. This was also a 9pc increase from 2021's depressed volumes at the peak of the pandemic.
The government is also extending cuts to fuel consumption taxes for thermal coal and LNG used in power generation until the end of June 2023, in an attempt to mitigate the impact of high inflation.
South Korea's consumer price index rose by 5pc on the year in November, while its producer price index surged by 7.3pc on the year in October, the latest Bank of Korea data show.
