Gov’t to raise cigarette prices by 1.93 dollars

The government has decided to raise cigarette prices by 1.93 dollars by January 2015 to the 4.43 dollar level. Cigarette prices had remained in the 2.41 dollar range since 2004. In addition, the government plans to steadily raise cigarette prices by as much as annual inflation each year. The health ministry has announced the comprehensive anti-smoking measure, which includes these details through the 31st meeting of economics-related ministers.

The government expects by just raising cigarette prices by 1.93 dollars, it will lower male smoking rate, which is currently in the 43.7% level, to around 35%. Health Minister Moon Hyungpyo said the Ministry will implement powerful anti-smoking drives on par with key global nations, thereby lowering male smoking in Korea to 29% by 2020, and push down cigarette spending to two-thirds of current levels.

Among other non-price policies, the ministry also plans inserting horror-invoking warning pictures of the lungs of lung cancer patients, and prohibiting retailers including convenience stores from advertising cigarettes, thereby maximizing anti-smoking effects. It is also pushing to apply health insurance to patients undergoing treatments to stop smoking, reducing their out-of-pocket expenses.

In addition, larger anti-smoking advertising campaigns will see greater budgets, with anti-smoking campaigns to be held throughout the year. One-to-one tailored counseling service to prevent teen smoking will be stepped up, and anti-smoking clinic expansions at public health centers will also be supported.

Meanwhile, raising cigarette prices will add some 2.8 billion dollars to the annual tax income for the government. In reflection of global trends, a new consumption tax of 57 cents will be added, which will be a type of national tax. The current cigarette pricing is accounted for by a large amount by municipal taxes including on smoking consumption and municipal education, etc. This appears likely to fan criticism that the government is attempting to fill in its shortfalls in tax income by raising cigarette prices.

The ratio of health tax will also be raised from the current 14.2% to 18.6% in order to use tax income from raising cigarette prices to actual health promotion such as anti-smoking campaigns.

Yet considerable turbulence is expected until actual cigarette price raises. To raise cigarette prices, multiple laws on consumption tax, municipal tax, and public health promotion act etc are necessary but currently, the opposition party is against it. The ruling Saenuri Party got a report of the government’s final plan to raise cigarette prices by 1.93 dollars at the Supreme Council meeting and generally expressed positive attitudes to the government’s intention. However, the New Politics Alliance for Democracy decried it as a trick to rob the low-income to fill in the tax income shortfall. It demands the cancellation of the cigarette tax raising plan.