South Korea may consider linking cigarette price hikes to the growth of consumer inflation in an effort to reduce the country’s smoking rate and secure more revenue, officials said Sunday.
Tobacco prices have been frozen at the current 2,500 won ($2.28) per pack for more than eight years. The health ministry earlier said that average cigarette prices need to be raised to 7,000 won per pack to reduce the country’s smoking rate to what it called a desirable level.
The finance ministry said it has recently outsourced a study on revising taxation and non-pricing regulation on tobacco prices to accept opinions about its move to curb the country’s smoking rate.
“If cigarette prices are raised by more than 2,000 won as experts argue, it can invite unintended side effects,” said an official at the finance ministry.
“Specifics have not been decided, but it may be desirable to raise tobacco prices by linking them to inflation.”
A ruling party lawmaker submitted a bill calling for introducing a scheme of inflation-linked tobacco prices last July, which is pending in parliament.
If the inflation scheme is introduced, cigarette prices may first be hiked by some 500 to 600 won to reflect an average 2.2-4.7 percent growth in consumer prices from 2005-2012, officials said.
Korea’s overall smoking rate dropped from 28.8 percent in 2005 to 27 percent in 2011, the latest data available provided by the health ministry.
Proponents for raising tobacco prices said that the price hike will be effective in curbing the smoking rate, but opponents claimed that the move will only put upward pressure on consumer inflation and severely hurt the livelihoods of small tobacco vendors.
Finance Minister Hyun Oh-seok said that there is a need to consider hiking cigarette prices, adding that the government will closely consult with related agencies by taking into account national health and price burdens. (Yonhap News)
