Smokers complain about cigarette taxes

Scores of men gather in groups smoking and talking to each other outside GS Engineering & Construction in Jongno-gu, central Seoul, Tuesday morning. / Korea Times photo by Choi Kyong-ae

By Choi Kyong-ae

Kim Hyun-joong, a 47-year-old salaried worker in Seoul, makes it a rule to step out of his workplace three to four times a day to smoke. It has been his routine for the past two decades, but increased cigarette prices are a headache for him.

“The price of 2,500 won ($2.2) per pack was acceptable for me. But the higher 4,500 won (from Jan. 1) price is increasingly burdensome. I tried to quit smoking early this year but I failed,” said Kim who works for GS Engineering & Construction in Jongno-gu, central Seoul.

Now he tries to reduce his daily consumption of cigarettes to fewer than seven, from 12 or 13, as his wages have remained the same for the past two years and he is the breadwinner for a family of four.

Kim is not alone. He is one of many smokers in their 40s and 50s who pay more to smoke but their wages remain unchanged or have begun to shrink due to the peak wage system through which they get less pay for years from the age of 55 to open up jobs for younger generations.

“We smokers do not think the price hike was just aimed at curbing the country’s smoking population. It is also aimed at helping fill the shortage of national tax revenue,” Cho Sung-hwan, a 56-year-old colleague of Kim, said.

Kim and Cho were among scores of salaried employees who were talking to each other outside the construction company on Tuesday morning. The smokers were shunned by passersby who held their noses or held their breath in order not to inhale the cigarette smoke.

Four out of 10 men aged 16 to 64 in Korea were smokers as of the end of 2014. And the smoking population didn’t fall sharply as expected following the price increase this year, according to data from the Ministry of Health and Welfare.

Instead of sharply reducing the smoking population, the Ministry of Strategy and Finance said in August the government expected to collect cigarette taxes worth 10.88 trillion won this year, higher than its previous forecast of 9.49 trillion won. Cigarette taxes are projected to reach 11.48 trillion won in 2016, it added.

The finance ministry said in July of last year an increase of 2,000 won will cut cigarette sales by 34 percent to 2.86 billion packets this year from a year earlier. But in August of this year the ministry made a revision to the forecast saying cigarette sales will fall 25 percent to 3.28 billion packs this year, Kim Yung-rok, a policymaker of the main opposition New Politics Alliance for Democracy, said in a statement released on Monday.

“Rather than collecting taxes from high-income brackets, the government is imposing excessive taxes on low-income earners, the main consumers of cigarettes. It is not fair and not sustainable,” the Korea Tax Internet, the activist group for taxpayers’ rights, said Monday.

KT&G, the country’s dominant tobacco company, posted a net profit of 576.6 billion won in the January-June period, a 55 percent jump from 372.5 billion won a year earlier.

Operating profit also climbed 36 percent year-over-year to 740.9 billion won from 546.4 billion in the first six months. Sales were up 11 percent to 2.169 trillion won from 1.956 trillion won during the same period.

The earnings results show cigarette price hikes didn’t help curb the country’s high smoking rate. KT&G seems to be the main beneficiary of the price hikes, analysts said.

“Cigarette sales are rapidly recovering from declines early this year following the price increases. Tobacco companies are attracting young male and female customers in their 20s with new, high-end products,” Dongbu Securities analyst Cha Jae-heon said.