By Jung Min-ho
Cigarette prices may increase by more than 200 won once every two to three years following a plan for a huge hike next year, the government said Sunday.
According to the Ministry of Strategy and Finance and the Ministry of Health and Welfare, policymakers have decided to raise the tobacco price in line with general consumer prices ― a 5-percent increase every time the consumer price rises 5 percent.
The decision means cigarette prices may rise more regularly than every three years, if inflation meets the Bank of Korea’s 2.5 to 3.5 percent target range.
This follows last Thursday’s announcement that the price of cigarettes will rise from 2,500 won to 4,500 won ($4.30) a pack next year and continue to rise in line with inflation to reduce the country’s high smoking rate.
For example, if the consumer price on Jan. 1 is 100, the tobacco price will increase by 5 percent when the consumer price becomes 105. When a new cigarette price is set, the consumer price at that time will be set at 100, and if it becomes 105, the tobacco price will go up 5 percent again.
The health ministry believes the automatic rises will help discourage smokers, especially low-income earners, from their addiction.
The Korea Centers for Disease Control and Prevention said increasing prices was the most effective way to reduce smoking.
In fact, after the government raised the cigarette price by 500 won in 2004, the smoking rate among adult men dropped from 57.8 percent to 45.9 in 2006.
“The impact of the latest cigarette price hike was short-lived,” a health ministry official said. “We expect that the new policy will maintain the effect.”
Forty-four percent of Korean males smoke, much higher than the 25 percent average for the 34 members of the Organization for Economic Cooperation and Development (OECD).
The health ministry aims to cut the men’s smoking rate to 29 percent by 2020.
According to a recent Ministry of Health and Welfare survey, one in three smokers said they would quit if the ministry raised cigarette prices as planned.
More than 70 percent of cigarettes in Korea are sold for 2,500 won or less a packet, much cheaper than the average $6.40 among OECD members.
The government expects the tobacco price hike to boost tax revenue by 2.8 trillion won a year.
However, it is not yet certain if the price plan will survive politics. Some politicians are already trying to paint the plan as a government attempt to milk ordinary citizens in order to plug holes in its tax revenue.