In January 2015, the South Korean government raised the price of a pack of cigarettes from 2,500 won to 4,500 won. The justification of such a policy that the government revealed was that an increase in cigarette prices would reduce the number of smokers, which would lead to better national health. However, whether the policy is successful or not in both national health and economy still remains as a controversy.
When the increase in cigarette prices first took effect, the government expected cigarette sales to decrease by around 34%. According to the information from Korea Taxpayers’ Association, the actual cigarette sales in two years after the rise in prices were approximately 3.3 billion and 3.6 billion, respectively. Compared to the government’s original expected amount, 2.8 billion, the actual cigarette sales are still very high. The actual reduction rates were only 23.4％ and 15.9％. There is actually a reduction in smoker rates due to a decrease in cigarette prices, however, the numerical data implies that the change is not as significant as the government initially speculated.
On the other hand, in 2016, the government’s revenue from the tax imposed on cigarettes increased by a whopping 72%. The tax revenue in 2016 was 12.4 trillion won which was about 5.4 trillion won higher than that of the previous year. The government originally expected the annual increase in its tax revenue to be about 2.8 trillion won, however, the actual increase in a year was more than double the expected amount. Obviously, criticism from the public followed. The government faced huge criticism that questioned the purity of the original purpose of rise in cigarette prices. There was huge suspicion that the government’s goal was just to collect more tax from its people.
Some people shared their opinions with JSR. Mr. Suk Hyun Hwang, a heavy smoker who lives in Incheon, revealed his dissatisfaction towards the policy. He said that the rise in cigarette prices is “the government’s attempt to collect more tax from low-income consumers”. Mr. Horsfield, an economic expert who is currently working on his research in a school in Incheon, also revealed his opinion towards his issue. He said: “Since cigarettes are highly-addictive, it has highly inelastic demand, which means that rise in price wouldn’t have a significant effect on consumers’ demand for it. Therefore, just raising the cigarette price might not be a perfect way to reduce the smoker rate”.
There are number of factors other than price that affect the smoker rate. In order to have the best result both in national health and economy, other types of appropriate non-price policies should be sought out instead of simply adjusting the price of cigarettes.