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LKP sparks controversy over cigarette tax policy

July 28,2017
The main opposition party’s decision to push for a cigarette tax cut drew criticism for reversing a policy it strongly promoted less than three years ago, when it was the ruling party, under the justification of improving public health.

Rep. Yoon Han-hong of the Liberty Korea Party (LKP) sponsored a bill on Wednesday to cut taxes on cigarettes in order to lower the price to the same level as in 2014. A pack of cigarettes, now priced at 4,500 won ($4.04), would be 2,500 won under the plan.

According to Yoon, a first-term lawmaker and a close associate of LKP Chairman Hong Joon-pyo, the increased price of cigarettes failed to reduce the rate of smoking, proving that the policy was ineffective. He said he wants to restore the cigarette tax rates in 2014 because it is unfair to increase the government’s tax revenue if the intended effect is not being seen.

The Park Geun-hye administration decided in September 2014 to raise the cost of a pack to 4,500 won from Jan. 1, 2015, an increase of 2,000 won, or 80 percent. The government said at the time it wanted to discourage smoking and the Saenuri Party, the predecessor of the LKP, strongly backed the plan.

The policy temporarily worked as the cigarette sales went from 4.36 billion packs in 2014 to 3.33 billion packs, but it went back up to 3.66 billion packs last year. Meanwhile, revenue from cigarette taxes was 6.9 trillion won in 2014, but went up to 10.5 trillion won in 2015 and 12.4 trillion won in 2016. If Yoon’s bill is passed, the government is expected to face a 4.8 trillion won decrease in tax revenue.

Restoring the cigarette price to the former cost was a presidential election pledge of the defeated LKP candidate, Hong. Yoon, however, said his bill is unrelated to Hong’s pledge and the LKP has decided to back Yoon’s bill.

Chairman Hong urged the ruling Democratic Party to support the bill because, he said, it will help ordinary people. He also reminded the Democrats that they once protested the tax hike in 2014 as opposition lawmakers.

Rep. Hong Moon-pyo, secretary general of the LKP, also said in a radio interview on Thursday that the Park government’s policy failed. “We honestly admit that it didn’t have the intended effect of improving the people’s health,” he said.

Hong also said the bill is not meant to counter the Moon Jae-in administration and the ruling Democratic Party’s plans to impose higher taxes on leading companies and the wealthiest people. “When the economy is suffering, many ordinary people tend to drink and smoke,” he said. “Smokers said they feel burdened to smoke just one cigarette and asked us to lower the price.”

The LKP is also mulling a plan to lower the oil tax for all compact cars with an engine displacement under 2,000 cc (67.6 fl. oz.). The party is considering a plan of cutting the tax rate by half. If the plan is endorsed by the legislature, the government will face about 7.2 trillion won in tax revenue decreases. Rep. Yoon is also planning to sponsor a bill on the oil tax cut.

The ruling party condemned the LKP for shamelessly reversing its policy. “They increased the cigarette taxes but now they want them down,” Chairwoman Choo Mi-ae of the Democratic Party said Wednesday. “It is an admission that their justification for the tax hike was actually a lie.”

Rep. Youn Kwan-suk also said Thursday in a radio interview that the LKP must issue an apology to the people and admit that it lied to raise more taxes.

The conservative opposition Bareun Party also criticized the LKP for trying to undermine the Moon administration with the plan.

“Is this a joke?” said Rep. Kim Se-yeon, chief policymaker of the Bareun Party. “It felt like yesterday that the Saenuri Party increased the cigarette price for the sake of the people’s health, but now they want to lower it. Are they saying that it is now okay for the people’s health to get worse? The tax cut appears to be intended to shake up the Moon administration.”

The Justice Party also demanded that the LKP admit that the cigarette tax hike was not for public health but was to make up for lost revenue after a tax cut for the rich.

BY SER MYO-JA [ser.myoja@joongang.co.kr]


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