In this blog post, I will analyze whether the South Korean government’s cigarette price hike is a policy aimed at public health or a strategy to secure tax revenue, based on various perspectives.
After Reading Jeremy Rifkin’s ‘Entropy’
While reading Jeremy Rifkin’s ‘Entropy’ and reflecting on the concept of entropy, I realized that income redistribution is a process that increases entropy. Although the term “entropy” is primarily used in the natural sciences to describe the disorder of nature, in this book, the author applies the concept of entropy to human society, arguing that social phenomena can be interpreted in the same way as natural phenomena. Therefore, he argues that the concentration of wealth in specific social classes represents a decrease in entropy—a measure of disorder—and just as a decrease in entropy leads to the destruction of a system in nature, various policies must be enacted to increase entropy if our society is to develop constructively. While investigating whether South Korea’s income redistribution policies are being formulated to increase entropy, I came across the policy to raise cigarette prices.
The South Korean government issued a legislative notice for four days, from September 12 to 15, 2014, and submitted the “Partial Amendment Bill to the National Health Promotion Act,” which raises cigarette prices, to the National Assembly. But why did the government attempt to amend the bill so hastily without undergoing a sufficient public consultation process? I have investigated the government’s cigarette price hike policy and, through this, intend to oppose the government’s policy formulation.
The Harms of Tobacco and Government Policy
It has long been widely known that tobacco is extremely harmful to the body. Smoking is a major risk factor for cardiovascular disease and can cause problems such as vasoconstriction, damage to vascular endothelial cells, increased adrenaline secretion, cellular hypoxia, elevated LDL (bad cholesterol), atherosclerosis, and cancer. The World Health Organization (WHO) prohibits the production and sale of any food product containing even a single carcinogen or suspected carcinogen. However, tobacco is the only product sold in defiance of this rule; despite containing approximately 60 types of carcinogens and addictive substances, it is recognized as a luxury item, and many adults smoke it. Currently, 44.3% of adult men in Korea smoke, and it is only natural for the government to take measures at the national level to prevent citizens from ingesting carcinogens. I, too, support such measures. However, upon closer examination, the government’s proposed cigarette price hike appeared to be a policy aimed at increasing tax revenue rather than reducing the smoking rate. Although I am a non-smoker, I have come to strongly oppose this proposal.
The Logic Behind the Pro-Hike Position
Those in favor of raising cigarette prices argue that doing so can reduce the national smoking rate. For a long time, the government has conducted various anti-smoking campaigns, but these have yielded only minimal results, with the smoking rate decreasing by a mere 0.8%. However, citing the example from 2004 when a 500-won increase in cigarette prices led to a 9% drop in the smoking rate, they conclude that raising cigarette prices has a direct effect on reducing smoking rates. Furthermore, they argue that the increased tax revenue from higher cigarette prices can be invested in various public welfare activities, such as anti-smoking campaigns. Finally, they argue that raising cigarette prices can lower the smoking rate among adolescents. This is because higher prices create a financial burden for adolescents, making it difficult for them to purchase cigarettes, thereby addressing the problem of South Korea having the highest adolescent smoking rate among OECD countries. Thus, those who take a positive stance on raising cigarette prices argue, based on various grounds, that it is a necessary and appropriate measure.
Problems and Social Impacts of Cigarette Price Hikes
However, there is a fatal flaw in their logic: this policy increases the burden on the working class. An increased burden on the working class means a widening wealth gap, and from the perspective of entropy, it implies that society is moving in a direction where entropy does not decrease. This suggests that, in the long term, Korean society may stagnate rather than develop. The reason the cigarette price hike increases the burden on the working class is that the majority of smokers belong to low-income groups. A sudden increase in cigarette prices exacerbates income regressivity, forcing people with lower incomes to pay even more in taxes. Even before the price hike, cigarettes were the product with the most severe regressive tax burden in Korea. Given this, it is highly questionable whether raising cigarette prices by another 2,000 won will lead Korean society in a direction where entropy increases.
Furthermore, there is a major issue with the breakdown of the 2,000-won price increase. Specifically, 594 won—approximately 30% of the total—is levied as an individual consumption tax. The individual consumption tax was originally known as the special consumption tax and was a tax category intended for income redistribution. As an indirect tax levied on the purchase of goods regardless of income, the special consumption tax was primarily imposed on luxury goods and borne by high-income earners. It is difficult to understand, from a common-sense perspective, why such a tax is being imposed on cigarettes. In short, this is no different from saying that we intend to collect a tax on luxury goods from low-income earners. Even from the perspective of income regressivity, raising cigarette prices appears to be an inappropriate policy that reduces social entropy in Korean society, and there are many other issues when viewed from various other angles.
According to the Korea Institute for Health and Social Affairs’ report, “The Effects of Price Policies on Tobacco and Alcohol,” low-income earners indicated they would be willing to quit smoking only if the price per pack reached 8,497 won. This implies that if the government truly intends to lower the national smoking rate, it should raise cigarette prices to around 9,000 won, not 4,500 won. So why did the government set the specific increase at 2,000 won? The answer lies in the strong short-term addictiveness of cigarettes. This is because raising the price by only about 2,000 won would still allow many people to continue smoking, thereby maximizing tax revenue at that point. It raises the question of whether the government prioritized public health or securing tax revenue.
According to WHO standards, if the smoking rate falls below 5%, the sale of cigarettes can be legally banned. I do not oppose raising cigarette prices because I believe that if Korea’s smoking rate drops below 5%, cigarette sales will be banned, and if the entire population quits smoking, the incidence of cancer and cardiovascular diseases will decrease. However, if the government is pushing for a price hike solely to secure tax revenue, I believe it would be better not to implement this policy at all for the sake of the working class.
Examples from Other Countries and the Reality in Korea
Furthermore, there is a new argument that cigarette price hikes are not related to smoking rates. In Ireland, where a pack of cigarettes costs over 10,000 won, the smoking rate is 31%, ranking sixth in the world. This suggests that smoking rates are not simply regulated by cigarette prices but can vary depending on the social climate.
Furthermore, South Korea currently does not require the use of graphic health warnings on cigarette packs. Most countries mandate graphic health warnings in an effort to reduce smoking rates. However, South Korea is ignoring public opinion calling for the use of graphic and repulsive health warnings, opting instead to use text-based warnings. It is necessary to question once again whether the government is truly making an effort to reduce the national smoking rate.
Finally, there is an argument that the tax revenue generated from cigarette price hikes could be invested more heavily in anti-smoking campaigns and other initiatives. However, a review of the budget proposal by the National Assembly Budget Office reveals that only 152.1 billion won—a mere 5.47% of the increased tax revenue—was allocated to anti-smoking support. At a briefing for foreign correspondents, the government stated that if more tax revenue were secured through cigarette price hikes, it would focus that funding on smoking cessation activities and campaigns. However, the reality is that only about 5% of the budget was allocated to anti-smoking campaigns, while the remainder was earmarked for the medical industry or IT convergence industries. This aligns with the logic of collecting more taxes from the working class to invest in high-tech industries. If significant tax revenue is needed to invest in high-tech industries, then more taxes should be collected from high-income earners to facilitate wealth redistribution. This would increase entropy across society as a whole, leading to a healthier society. However, the government is pushing forward with cigarette price hikes to extract more taxes from the poor. Therefore, I strongly oppose the government’s policy of ignoring the long-term future in favor of securing short-term tax revenue.
Proposal for a New Policy
As mentioned earlier, cigarettes contain approximately 60 types of carcinogens and addictive substances. Nevertheless, the reason people cannot quit smoking and continue to do so is to temporarily relieve the severe stress they experience in daily life. When a person takes a puff of a cigarette, the smoke reaches the brain within five seconds, triggering the release of the hormone dopamine and providing temporary relief from stress.
Everyone knows that smoking cannot be a permanent or constructive solution. However, I hope the government recognizes that for low-income individuals—who see no viable alternative and face despair in every moment of their lives—smoking is a necessary evil they cannot quit, even though they know it is harmful. I believe new policies tailored to the current reality in Korea are needed. First, the government should raise cigarette prices to a high level, such as 9,000 won, to encourage the majority of the population to quit smoking. Alternatively, second, the government should abandon the price hike and instead secure the tax revenue needed for the medical and IT convergence industries by imposing higher taxes on high-income earners. I oppose the government’s current policy of raising cigarette prices because it prevents society from moving toward increased entropy and, from an entropic perspective, hinders the healthy growth of Korean society.
