In this blog post, we examine from various angles whether the cigarette price hike is a measure to promote public health or a means of increasing taxes on the working class.
Since 2015, the South Korean government has significantly raised cigarette prices as part of its anti-smoking policy aimed at promoting public health. With a 2,000-won increase from the previous price, most cigarette packs now cost over 4,000 won, which has become a major issue given that more than one-third of adult men in South Korea smoke. While the South Korean government argues that higher cigarette prices naturally reduce purchase rates, which in turn lowers the national smoking rate and improves public health, smokers counter that such a drastic price hike ultimately only increases the financial burden on ordinary citizens. Amid this debate, I oppose the cigarette price hike proposal based on the following grounds.
First, as mentioned above, raising cigarette prices increases the economic burden on low-income households. According to a survey released by the Korea Disease Control and Prevention Agency in 2014, when adult men were classified into four income groups—low, lower-middle, high, and upper-middle—the smoking rate differed by up to 10 percentage points between the highest and lowest income groups, with smoking rates being higher among lower-income groups. As these survey results indicate, cigarette consumption was particularly high among the working class, meaning that they will bear the heaviest burden from the price hike. This is because while an increase of 2,000 won per pack will be a significant burden for working-class smokers who consume cigarettes regularly, the wealthy will not experience any major inconvenience. This clearly violates the principle of tax equity, as explicitly stipulated in Article 18 of the Framework Act on Taxation—namely, that taxes must be levied fairly according to income level. We often see office workers and laborers using a single cigarette to blow away the fatigue and stress of the day. For them, cigarettes are likely a cheap means of forgetting the hardships of today and gaining the strength to face tomorrow. In this way, cigarettes are a luxury item closely tied to the lives of ordinary people. If the South Korean government had given even a little more consideration to this characteristic of cigarettes, it would not have adopted such a steep method of raising cigarette prices.
Next, it is doubtful whether the true purpose of the cigarette price hike is really “the promotion of public health,” as announced by the South Korean government. Considering that the effect of the 500-won cigarette price hike in 2004 lasted only five months, the effectiveness of the price hike itself is questionable. Moreover, there are various methods other than raising cigarette prices to encourage smokers to quit and reduce the smoking rate. A prime example is the “use of graphic health warnings on cigarette packs,” currently implemented in many countries. This is a representative “non-price policy” that can reduce smoking rates without significant effort, and as evidenced by examples from other countries, it is a proven method. In fact, in Canada, which has implemented the graphic warning policy, the smoking rate dropped by 6% over the six years following the policy’s introduction, while in Brazil, it fell by 8.6 percentage points in just one year. This bill had been repeatedly proposed in the National Assembly over the past 13 years but was only partially passed for the first time this year—with the caveat that “the graphic warnings must not be excessively repulsive.” If graphic warnings—intended to lower smoking rates by highlighting the harms of smoking—are not meant to be repulsive, then what is the point of including them at all? Given the South Korean government’s lack of initiative in adopting such non-price measures to reduce smoking rates, anyone would be skeptical that improving public health is truly the goal of cigarette price hikes. In fact, according to a survey conducted by Representative Yang Seung-jo of the National Assembly’s Health and Welfare Committee, while 33.0% of respondents viewed the cigarette price hike as a smoking cessation policy for public health, 61.1%—nearly twice as many—saw it as a tax increase on the working class to make up for the shortfall in tax revenue. Notably, 77.3% of smokers answered that the price hike was intended to raise taxes. Given the South Korean government’s approach of simply raising cigarette prices without implementing other effective anti-smoking policies, and considering the public’s reaction to this, one cannot help but wonder if the cigarette price hike policy is merely a ploy to make up for a shortfall in tax revenue.
Some might argue, in response to my first point, that increasing the burden on ordinary citizens is inevitable if we are to expect the price hike to reduce smoking rates. They argue that if the process isn’t painful, how can smokers possibly quit? However, we must consider that cigarettes are a classic example of an “inelastic” luxury good. “Inelastic” means that existing consumers have very high loyalty to the product and are largely unaffected by price changes; typical inelastic goods include cigarettes, alcohol, and daily necessities. While circumstances vary by country and this cannot be directly applied to South Korea, Japan—which raised cigarette prices by about 1,500 won around 2010—saw a slight increase in the smoking rate. Furthermore, as briefly mentioned earlier, when cigarette prices were raised by 500 won around 2004, the resulting decrease in the smoking rate lasted only about five months. Considering these examples, it is doubtful whether a policy to raise cigarette prices can actually produce a significant reduction in smoking rates. Furthermore, given that tax equality must be upheld under all circumstances, there is no disputing that raising cigarette prices increases the burden on low-income citizens. Furthermore, the right to smoke is an undeniable right of citizens; if smoking cessation is enforced rather than encouraged through voluntary means, this can be viewed as a violation of smokers’ rights.
Additionally, it could be argued that since the National Health Promotion Fund—used to support smokers’ health—has increased alongside the rise in cigarette prices, allowing for greater investment in smokers’ health, the government is actually making efforts to improve public health and that there is no cause for concern. However, when considering a pack of cigarettes (2,500 won), while the National Health Promotion Fund increased by approximately 500 won—from 354 won to 841 won—the total increase in taxes, including cigarette consumption tax, local education tax, value-added tax, and the newly introduced selective consumption tax, amounts to about 1,300 won. Given this, it seems difficult to avoid the argument that this constitutes a clear tax hike. Furthermore, although this strays slightly from the main point, the South Korean government increased the budget for the National Health Promotion Fund anticipating that tax revenue would rise due to the cigarette price hike, but failed to make accurate predictions, resulting in a budget shortfall. While 316.3 billion won was planned for expenditure, the actual amount spent was only 117.4 billion won. If the true intention was to increase the National Health Promotion Fund to improve the welfare of smokers, it has clearly failed.
Of course, smoking causes significant harm to both individuals and the nation. At the national level, vast sums are invested annually in smoking prevention and the management of smoking-related diseases, and these diseases cause immense suffering for countless people. However, the South Korean government’s policy of raising cigarette prices to encourage smoking cessation appears problematic in several ways. As mentioned above, it increases the financial burden on ordinary citizens, and its intentions are also questionable. I criticize the South Korean government for this attitude, which shows no consideration for ordinary citizens, and for these actions that attempt to secure tax revenue through underhanded means. Furthermore, since this policy seeks to reduce smoking rates by forcibly preventing smoking rather than encouraging smokers to quit voluntarily, various adverse effects are anticipated. I hope the South Korean government will give this matter more careful thought and consideration, and implement policies that are more effective and reduce the burden on the public, rather than simply raising cigarette prices. If this happens, it will promote the health and well-being of the people on a national level, and the public will be able to break free from the clutches of smoking more easily.
