Tax revenue from tobacco sales grew 38 percent in six months after the government-led tobacco price hike, while the sales volume dropped considerably, the Finance Ministry data revealed Sunday.
In the January-June period, the government collected about 4.3 trillion won ($3.8 billion) in tax revenue from tobacco sales, up 1.2 trillion won from a year earlier.
During the same period, cigarette sales dropped 28.3 percent due to the drastic tobacco tax hike that started on Jan. 1.
After the new cigarette pricing went into effect, the general price of cigarettes soared to 4,500 won, up 80 percent from the previous 2,500 won.
Cigarettes are displayed in a local store in Seoul. (Yonhap)
The tobacco tax hike was part of the Health Ministry’s strategy to reduce smoking rates among the population. Last year, the Health Ministry argued that the country’s low cigarette prices, the lowest of 34 OECD members, was the biggest hindrance to getting smokers to quit.
Finance Minister Choi Kyung-hwan also supported the move, as he alleged in 2013 that a price hike on hard liquor and cigarettes must be implemented to enhance public health.
Yet within the six-month period, the monthly cigarette sales picked up quickly, pointing to the fast recovery of cigarette sales volume.
The tax revenue grew 40 billion won in January, 100 billion won in February, 130 billion won in March and 330 billion won in April. The growth slowed to 270 billion won in May and rebounded to 320 billion won in June.
Market observers said the psychological effect of price shock on smokers has lessened over time, as cigarette manufacturers here had predicted before the enforcement.
Back in March, the National Assembly Budget Office estimated that this year’s tobacco tax revenue will grow 5.5 trillion won. Parliamentary researchers predicted that the nation’s cigarette purchases would reach 3.5 billion packs, 800 million more than the government estimate.
By Chung Joo-won (joowonc@heraldcorp.com)