Tax revenue from cigarette sales is expected to reach more than 12.68 trillion won ($10.72 billion) next year, nearly double the increase from 2014, a report showed Monday.

The independent Korea Federation of Taxpayers said in its report that this increase is attributable mainly to the sharp tax hike early this year but little reduction in sales volume.

The government raised a total of 6.74 trillion won in tobacco tax revenue in 2014 before the tax hike took effect on Jan. 1 this year.

This year, it is estimated that the government will be able to collect 11.17 trillion won, up 4.42 trillion won from the previous year.

The government had predicted that the tax revenue would increase only by about 2.78 trillion won this and next year, respectively, as sales were expected to drop due to the price hike.

In the report that was submitted to Rep. Yun Ho-jung of the main opposition New Politics Alliance for Democracy, the federation said the government might have tried to lower its cigarette tax revenue estimates to attain the goal of a price hike.

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.

The tobacco tax hike was part of the government’s strategy to reduce the smoking rate in Korea.

Despite the sharp price hike, however, tobacco sales -- which plunged early this year -- have started recovering, overshadowing the purpose of the pricing policy.

In the January-June period, the government collected about 4.3 trillion won 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.

Market observers said the psychological effect of a price shock on smokers has lessened over time.


By Chung Joo-won
joowonc@heraldcorp.com)