Gov’t to announce a cigarette price increase on Thursday

The government releases comprehensive measures to reduce smoking including a cigarette price increase on Thursday. It is likely to emerge as a hot issue of debate in the regular session of the National Assembly as an increase in tobacco taxes and impact fees requires lawmakers’ consent.

According to government sources on Tuesday, the government will discuss comprehensive measures against smoking released by the Health and Welfare Ministry at an economy meeting hosted by Deputy Prime Minister and Finance Minister Choi Kyung-hwan on Thursday. The Health and Welfare Ministry plans to announce a cigarette price increase bill after the meeting. The government and the political community are reviewing an option to increase the price of cigarettes by 1,000 won (0.98 U.S. dollar) to 2,000 won (1.95 dollars) per pack by raising tobacco taxes and impact fees.

Korea’s tobacco taxes as a percentage of cigarette prices are 62 percent, lower than 70 percent, a level recommended by the World Health Organization. A pack of cigarettes has 1,549 won (1.51 dollars) in tobacco taxes, which include a tobacco consumption tax (641 won or 63 cents), a health impact fee (354 won or 35 cents), a local education tax (320 won or 31 cents), a value-added tax (227 won or 22 cents), and a waste impact fee (7 won or 1 cent). The government is said to consider raising taxes and impact fees per each tax item and also increasing an individual income tax. In addition, the government will release a revised bill on the Local Tax Act, which includes an increase in a residence tax and the suspension of local tax exemption benefits. Although it is a way to fill the coffers of local governments, it could become controversial as it increase taxpayers’ burden.