Government Implements Duty-Free Policy on LNG and LPG Until Year-End

Energy Sector Allocation Tariff and Fuel Tax Management Plan for the Second Half of the Year. [Photo=Ministry of Finance and Economy]

The South Korean government has announced a duty-free policy on certain petroleum products until the end of the year, in response to soaring oil prices and rising consumer costs following the Middle East conflict. Additionally, it plans to implement allocated tariffs on 22 agricultural products to alleviate consumer burdens in the second half of the year.

Koo Yoon-cheol, Deputy Prime Minister and Minister of Finance and Economy, revealed these measures on June 18 during a special task force meeting on living prices.

Starting this second half of the year, the government will apply a 0% allocated tariff on liquefied natural gas (LNG), propane, butane, and crude oil used for LPG production. Furthermore, it will temporarily reduce the excise tax on LNG for power generation until December and extend the reduced fuel tax rate on LPG butane by one month.

The Ministry of Finance and Economy plans to study whether the duty-free measures will exert downward pressure on consumer prices. A ministry official explained, "Allocated tariffs are not applied at the consumer level but rather reduce taxes at the import stage when businesses purchase goods. We are conducting research, and it has been confirmed that there is downward pressure on prices; however, consumers may find it difficult to perceive this effect."

In the agricultural sector, the government will support allocated tariffs on a total of 22 items, including three types of fruits, 17 food ingredients, and two feed ingredients. The allocated tariff period for 13 items set to expire will be extended, and new allocated tariffs will be applied to feed ingredients until the end of the year.

While the duration of the allocated tariffs has been extended, the quantity remains unchanged due to the existing stock not being depleted. The Ministry of Finance and Economy decided to extend the period in consultation with the Ministry of Agriculture, Food and Rural Affairs.

A ministry official noted, "Energy has a basic tariff of 3%, which limits further reductions, but we can lower agricultural allocated tariffs by up to 40%, and this time we have reduced them by about 20-30%. However, consumer prices may still be influenced by distribution margins, so we plan to strengthen oversight to prevent profit abuse during the distribution process."

The Ministry of Finance and Economy intends to submit amendments to the regulations on allocated tariffs and the enforcement decree of the excise tax law to the Cabinet for approval, aiming to implement them starting July 1. Additionally, the 17 food ingredient items will be designated as key management items for allocated tariffs to ensure that the benefits of tax reductions are directly passed on to consumers through enhanced distribution oversight.

* This article has been translated by AI.