Tobacco price hikes for bigger tax revenues

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Tobacco price hikes for bigger tax revenues

The government plans to go ahead with its plan to raise tobacco prices despite protests and questions about its effectiveness. Its motive to discourage smoking by raising tobacco prices for public health cannot be disputed. But whether the hike should be as high as 2,000 won ($1.80) remains questionable. It is not clear if the government is genuinely concerned about public health or more interested in raising tax revenue easily.

The government has been citing smoking data of the Organization for Economic Cooperation and Development (OECD) to argue for the need to hike tobacco prices. South Korea is among the top in OECD rankings in smoking rate and bottom in tobacco prices. South Korean adult males are the largest smokers. According to OECD data, the Korean adult male smoking rate is 40.8 percent. Female smoking is 5.2 percent and smoking among teenagers aged 15 and under is 22.9 percent, slightly higher than the OECD average of 21.13 percent. South Koreans’ smoking rate in fact is not that serious. Yet the government has been pitching it as if South Koreans are among the world’s biggest smokers because tobacco prices are cheap. If the purpose of a price hike is for public health, authorities should present correct data and analysis to draw a public consensus.

Annual tax revenue from tobacco sales reaches around 7 trillion won a year. Of it, 2 trillion won is set aside for the public health promotion fund. The fund entirely running on tobacco sales is designed to help improve public health. But none of it is spent on smokers. Just around 1 percent - or 21.8 billion won - is used for the antismoking campaign. It is no wonder smokers cannot believe the government is raising prices to promote public health. From what it stands so far, the purpose behind the price hike appears to be for bigger tax revenues.

by Choi Yong-ki,Professor at Changwon National University

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