Cigarette tax revenues to reach W57tr over next 5 years

A sharp increase in cigarette excise taxes that went into effect during the previous administration is expected to bring in over 57.2 trillion won ($50 billion) in taxes during the Moon Jae-in administration, according to data from a non-governmental organization Wednesday.

The Korea Taxpayers’ Association said that based on cigarette sales data through to April, it estimated that 3.52 billion packs of cigarettes would be sold this year in Korea, with taxes applicable to 3.45 billion packs totaling 11.45 trillion won.

These estimates are substantially higher than the 2.87 billion packs that the government had projected to be sold this year, based on the tax raise in January 2015.

The increase nearly doubled the average price of cigarettes from 2,500 won per pack to 4,500 won.

The numbers indicate that the government’s anti-smoking policies through tax hikes have been less effective than originally anticipated.

After the hike, tax revenues from cigarette sales rose to 12.4 trillion won in 2016, making up 4 percent of total taxes collected last year compared to 2.6 percent in 2014.

The Korea Taxpayers’ Association claimed that a “significant portion” of the 11.2 trillion additional budget proposed by the government would be funded by cigarette tax revenues. The association’s president Kim Sun-taek called the cigarette excise tax a regressive tax that burdened low income earners.

By Won Ho-jung (hjwon@heraldcorp.com)