Move to increase tax by 100 percent marks government attempt to reduce one of the world's highest smoking rates.
South Korea has proposed a tax hike that would nearly double cigarette prices as the government tries to reduce one of the world's highest smoking rates among adult males.
The proposal on Thursday was immediately criticised by the main opposition party, highlighting the difficulty in implementing anti-smoking regulations in a country where the health risks associated with smoking are not widely publicised.The proposal calls for a more than 100 percent tax increase on a pack of cigarettes, which would double current prices that range between $1.9-$2.4 - far less than the $12 per pack that smokers pay in Australia, which recently toughened its anti-smoking laws.
The price of a pack of 20 cigarettes will rise by about 2,000 won ($1.93) from January, almost double the current average price of 2,500 won. That will help lower the smoking rate for adult males to 29 percent by 2020 from 44 percent now, Health and Welfare Minister Moon Hyung Pyo said in Seoul today.
The initiative also suggested banning cigarette advertisements in convenience stores and making graphic warning
labels on cigarette packs mandatory.
KT&G, which sells 60 percent of all cigarettes bought in the country, declined to comment on the tax proposal. Shares of KT&G Corp. (033780), the former state-run company that accounts for 62 percent cigarette sales in South Korea, fell 5.6 percent, the most in almost four years.
Philip Morris International Inc. (PM) has 19 percent share and British American Tobacco Plc (BATS) has 13 percent, according to data from the Korea Tobacco Association for 2013.
KT&G declined to comment on the announcement, according to text message sent by the company.
Shares in GS Retail Co. (007070), the country’s largest convenience store operator, rose 1.8 percent. The benchmark Kospi stock index fell 0.7 percent.
"It is a trick to make up for the revenue shortage by emptying the pockets of working-class people and smokers."
South Koreans are among the heaviest smokers in the world: just under half of all adult males smoke, government data shows, compared to an average of 25.4 percent in the 34 countries that are members of the Organisation for Economic Cooperation and Development.
The government said it expected higher cigarette prices to deter teenagers from picking up the habit, as research showed youth were up to four times more price-conscious than adults.
The proposal, however, is likely to face an uphill battle in parliament after the main opposition party, the New Politics Alliance for Democracy, dismissed it.
"It is a trick to make up for the revenue shortage by emptying the pockets of working-class people and smokers," party spokesman Kim Young-geun told reporters in parliament.
The tobacco tax could boost tax revenue by $2.7bn per year, the government said.
A Seoul-based official at a foreign tobacco company also criticised the proposed price increase.
"The one-off drastic price hike like this is unlikely to result in the [intended] drop in the smoking rate while at the
same time creating many side-effects such as smuggling and fake tobacco products," the executive said, declining to be named due to the sensitivity of the matter.
Smoker Lobby
The increase is “taxation of the working class,” said the Korea Smokers Association, a group that advocates for smoker rights.
It will raise the consumer price index by 0.62 percentage point, with the impact on inflation likely to be limited, the government said in a statement.
“The government always picks on ’salarymen’ when they are short of revenue,” said Lee Sung Kyu, a 28-year-old department-store worker who said he has smoked for eight years. “It’s unfair to shift the tax burden on a certain class of people. It’s not an offense to smoke, is it?”
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