South Korea’s tobacco tax hike a health boon or a burden on the poor?

The South Korean government’s tobacco tax hike aims to improve the country’s health, but it raises questions about the economic burden on the poor and the effectiveness of the policy. The need for non-price policies to reduce smoking rates is emphasized.

 

Since 2015, the South Korean government has significantly increased the price of cigarettes as part of the government’s anti-smoking policy to improve public health. The increase of 2,000 won from the previous price of a pack of cigarettes brought the price of most cigarettes to over 4,000 won, which is a big deal in South Korea, where more than one-third of adult men smoke. While the Korean government’s opinion that higher cigarette prices will naturally lead to a decrease in the purchase rate of cigarettes and thus improve the health of the population, and the smokers’ opinion that such a large increase in the price of cigarettes will only increase the burden on the common people, I oppose the proposal to increase the price of cigarettes for the following reasons.
First of all, as mentioned above, raising the price of cigarettes will increase the economic burden on the common people. According to a 2014 study by the Centers for Disease Control and Prevention, when adult males were categorized into four groups based on income level: low, middle, high, and very high, the difference in smoking prevalence between the upper and lower income groups was as much as 10 percent, and the lower the income, the higher the prevalence. As the results of this study show, cigarette consumption is more prevalent among the lower income groups, which means that the lower income groups will feel the most burden from the cigarette price hike. The increase of 2,000 won per pack will be a significant burden for those who regularly consume cigarettes, while the wealthy will not experience much inconvenience. This is a clear violation of tax equity, which is clearly stated in Article 18 of the Basic Tax Act, which states that taxes should be collected equitably according to income levels. We often see office workers and laborers using cigarettes to get rid of the fatigue and stress of the day. For them, cigarettes are a cheap way to forget the hardships of today and gain the strength to face tomorrow. As such, cigarettes are a symbol that is closely connected to the lives of ordinary people. If the Korean government had taken this into consideration, it would not have raised the price of cigarettes so steeply.
Next, it is doubtful that the purpose of the price hike is to “improve the health of the people” as the Korean government announced. Not only is the effectiveness of the tobacco tax hike itself questionable, considering that the 500 won increase in 2004 lasted only five months, but there are many other ways to reduce smoking rates and encourage smokers to quit. A representative method is “inserting warning pictures on cigarette packs,” which is currently implemented in many countries, which is a representative “non-price policy” that can reduce smoking rates without much effort, and is a proven method as shown by examples from other countries. In fact, Canada, which has a warning pictogram policy in place, saw a 6% reduction in smoking prevalence in the six years after the program was introduced, and Brazil saw an 8.6 point reduction in just one year. The bill was first partially passed this year after being introduced in the National Assembly for the past 13 years, with the proviso that “the warning pictures must not be overly aversive”. If the warning pictures are not offensive, why would they be included at all if they are meant to reduce smoking rates? The Korean government’s reluctance to introduce non-price factors that could reduce smoking rates makes one wonder if improving public health is really the goal of the tobacco tax hike. In fact, according to a survey conducted by Representative Yang Seung-jo, a member of the National Assembly’s Health and Welfare Committee, 33.0 percent of respondents said that the cigarette tax hike was an anti-smoking policy to improve public health, while 61.1 percent said it was a tax hike to raise tax revenue from the public, and 77.3 percent of smokers said it was a tax hike. The Korean government’s decision to simply increase tobacco taxes without implementing other effective anti-smoking policies, and the public’s reaction to it, makes me wonder if the tobacco tax hike is simply a ploy to raise revenue.
Some may argue against my first point, saying that in order to reduce smoking rates by raising the price of cigarettes, it is natural to increase the burden on the common people. After all, how can smokers quit if the process is not painful? However, we have to take into account that cigarettes are a typical “inelastic” good. Inelastic means that existing consumers are very loyal to a good and are not affected by price changes, and typical inelastic goods include cigarettes, alcohol, and daily necessities. While it is not possible to apply this to the Korean case as it is different for each country, in Japan, where the price of cigarettes was raised by about 1,500 won in 2010, the smoking rate increased slightly, and as mentioned above, the effect of reducing the smoking rate only lasted for about five months when the price of cigarettes was raised by 500 won in 2004. Considering these examples, it is doubtful that the policy of raising the price of cigarettes will have a significant effect on reducing smoking rates. In addition, it is indisputable that raising the price of cigarettes increases the burden on the common people, as equality of taxation must be maintained in any case. In addition, the right to smoke is a strict right of the people, and it can be seen as a violation of the right to smoke if smokers are forced to quit smoking rather than encouraged to quit voluntarily.
It can also be argued that as the price of cigarettes has increased, the National Health Promotion Fund, which is used for the health of smokers, has also increased, so the government can invest more in the health of smokers, so it is actually trying to improve the health of the people and there is nothing wrong with it. However, based on a pack of cigarettes (2500 won), the National Health Promotion Fund has increased by about 500 won from 354 won to 841 won, but the increase in tobacco excise tax, local education tax, value-added tax, and the newly created individual consumption tax amounts to about 1,300 won, so it is difficult to avoid the argument that it is an obvious increase. Also, while this is a bit off topic, the Korean government increased the budget of the National Health Promotion Fund in anticipation of increased tax revenues due to the increase in tobacco taxes, but it failed to forecast properly, resulting in a budget hole. They planned to collect 316.3 billion won, but the actual amount was only 117.4 billion won. If the purpose of increasing the National Health Promotion Fund was to consider the welfare of smokers, it failed.
Of course, smoking takes a toll on both individuals and the country. As a nation, we spend tons of money every year on smoking prevention and smoking-related disease management, and the diseases caused by smoking cause countless people to suffer. However, the South Korean government’s policy of raising the price of cigarettes to discourage smoking seems problematic for a number of reasons. As mentioned above, it adds to the financial burden of the common man, and its intentions are questionable. I criticize the Korean government’s lack of consideration for the common people and its attempts to secure tax revenues in a gimmicky way. Furthermore, the policy is not designed to reduce smoking rates by encouraging smokers to quit voluntarily, but rather by forcing them to stop smoking, which has a number of side effects. We hope that the Korean government will give more thought and consideration to implement more effective and less burdensome policies instead of raising the price of cigarettes. If that happens, the health and well-being of the people will be improved as a nation, and the people will be able to break free from the vice of smoking more easily.