A different look at the dataMost smokers are enraged that lawmakers and health authorities are attempting to make up for tax revenue shortages at their expense by hiking up the price of a pack of cigarettes from the current 2,500 won to 4,500 won ($2.24 to $4.03) They argue that such a steep hike can only suggest the motive is public finance rather than a concern for public health.
Representative Kim Jae-won of the ruling Saenuri Party, who sponsored the bill, and the Ministry of Health and Welfare claim the rise is primarily aimed at bringing down smoking rates, but various statistics show that higher prices don’t effectively help deter smoking. Because tobacco demand is generally low in elasticity, or sensitivity to price increases, smoking rates would come down shortly after the price increases but would later return to previous levels.
The widespread warning that Korea’s smoking rate of 40 percent is the highest among Organization for Economic Cooperation and Development member nations is also misleading. That number simply refers to adult male smokers. According to the Health and Welfare Ministry, Korea’s adult smoking rate was 20.7 percent as of 2011, which is about the same or lower than the average of Western societies. The female smoking rate is among the lowest in the world.
A drastic rise in cigarette prices would most hurt ordinary people. Extra expenditures for smokers would make life more miserable amid the prolonged economic slowdown. Physical laborers and factory workers smoke twice as much as people who work in offices. Data show that cigarette tax is one of the most regressive forms of taxation, which means the cost largely falls on lower-income citizens. Sharp increases would only aggravate wealth polarization and social resentment.
Higher cigarette prices could also send negative repercussions throughout the economy. According to Statistics Korea data, the weighted average of cigarettes on the consumer price index is 8.5 to 1,000. It’s listed as 20th major variant to inflation out of 489 items. If cigarette prices double to 5,000 won, consumer prices would rise by 0.85 percent, directly fanning inflationary pressure and affecting wage negotiations and other price-related policies such as the minimum state subsidies for the poor.
Steep hikes in cigarette prices also could foster hoarding and a growth of the black market. Smuggled or low-quality cigarettes may be illegally traded to meet demand of poor consumers. These illegally manufactured and imported products have triple the nicotine and other hazardous ingredients of local brands and have poor-quality filters. They could further threaten the health of smokers. Low-income and teenage smokers could be targeted as the main clients for these questionable products.
The socioeconomic cost of smoking often cited by health authorities is exaggerated. One civilian group said the damages from smoking such as treatment, care and early death amount to 5.6 trillion won a year. But this is not an accurate statistic. Various factors may have been bundled together under the banner of smoking, while the benefits of smoking, such as the relieving of stress, have not been taken into account.
Smokers have always been shunned whenever the government and politicians discuss hiking the tax on cigarettes. The government and legislators should listen to smokers first and come up with reasonable changes in prices.
By Lee Yeon-ik, The author runs the online community ilovesmoking.co.kr.
Translation by the Korea JoongAng Daily staff