As calls grow for a cigarette price increase from the current 4,500 won to 8,500 won, attention is turning to the potential economic burden on smokers and changes in tobacco consumption.
Park Eun-cheol, head of the Medical Policy Division at the National Academy of Medicine of Korea, proposed the price hike during a media forum titled 'New Tobacco Trends and Directions for Smoking Cessation Policy' held at the Korea Press Center in Jung-gu, Seoul, on November 10.
Park cited the freeze on cigarette prices since 2015 and the relatively low domestic tobacco prices compared to other OECD countries, adjusted for purchasing power parity (PPP), as reasons for the proposed increase.
If the price rises to 8,500 won, a smoker consuming one pack daily would see their daily expenditure increase from 4,500 won to 8,500 won. Monthly spending would rise from 135,000 won to 255,000 won, an increase of 120,000 won. Annually, this would amount to an additional 1.46 million won, raising total spending from 1.6425 million won to 3.1025 million won. Even for those smoking half a pack daily, the annual additional burden would reach 730,000 won.
Consumption of tobacco is expected to decline. According to Park's scenario analysis, if the price is raised to 8,500 won, sales of cigarettes are projected to drop by 35.6%, and the adult smoking rate is estimated to fall from 17% to 14%, a decrease of 3 percentage points.
On the other hand, annual tax revenue from tobacco is expected to increase by approximately 2.76 trillion won. This suggests that even with reduced consumption, the increase in tax burden from the price hike could outweigh the decline in sales.
A similar phenomenon was observed during past price increases. In January 2015, the government raised cigarette prices by 2,000 won, from 2,500 won to 4,500 won.
According to the Ministry of Economy and Finance, cigarette sales in 2015 totaled 3.33 billion packs, a 23.7% decrease from 4.36 billion packs the previous year. However, tobacco-related tax revenue rose from approximately 6.9 trillion won in 2014 to about 10.5 trillion won in 2015, an increase of around 3.6 trillion won.
Sales rebounded the following year, with 2016 sales reaching 3.66 billion packs, an increase of about 9.9% from the previous year. This indicates that the initial drop in consumption following the price increase was somewhat mitigated.
While the reduction in consumption due to the price hike has positive implications for public health, concerns have been raised that the tax burden may disproportionately affect individuals based on their income levels.
* This article has been translated by AI.
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