Government Takes Preemptive Measures to Block Tobacco Price Increase

Amid rumors of a tobacco price increase circulating within the industry, the Ministry of Economy and Finance has proactively blocked such speculation by stating that there will be no increase in tobacco prices.

On the 17th, the Ministry of Economy and Finance issued a press release stating, "The government is not considering any increase in tobacco prices, including raising the individual consumption tax rate on tobacco," and urged, "Please refrain from reporting based on unfounded rumors of a price hike."

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Earlier, during the confirmation hearing of Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance, the government also expressed its stance that there would be no increase in tobacco prices. However, as rumors of a price hike continued to circulate, the government appears to have reaffirmed its position once again that there will be no increase.

The reason why rumors persist despite the government’s repeated statements that there will be no increase is due to the "10-year cycle increase theory" commonly accepted in the tobacco industry. This theory originated because tobacco prices rose from 2,000 won to 2,500 won in 2004, and then from 2,500 won to 4,500 won in 2014, marking a 10-year interval. The large increase at that time left a strong impression on the majority of the public, but tobacco prices have not always been raised on a strict 10-year cycle.

Recent worsening tax revenue shortages have also fueled speculation that tobacco prices might be raised to compensate for the shortfall. From January to November last year, national tax revenue recorded 324.2 trillion won, a decrease of 49.4 trillion won (-13.2%) compared to the same period the previous year. This year, as the government introduced various tax reduction measures through economic policy directions, the possibility of offsetting the tax revenue deficit by raising tobacco prices has rapidly emerged.

Increasing tobacco prices is also directly linked to public health issues. Especially with the start of post-COVID-19 endemic recovery, smoking rates, which had declined during the pandemic, are sharply rising. According to the Korea Disease Control and Prevention Agency, smoking rates had steadily decreased since the 2008 survey but increased in 2022 and last year, with upward trends observed in both men and women. Experts have also voiced opinions that tobacco prices should be raised to reduce smoking rates. Last year, Seo Hong-kwan, director of the National Cancer Center, argued that tobacco prices should be raised to the OECD average level of 8,000 won.

However, raising tobacco prices is a difficult card for the government to play as it directly relates to increased taxation on low-income citizens. The Park Geun-hye administration, which raised tobacco prices from 2,500 won to 4,500 won, experienced a severe decline in approval ratings. In the previous administration, the health authorities announced a plan in 2021 through the "5th National Health Promotion Comprehensive Plan" to raise tobacco prices to the 8,000 won range within 10 years, but the plan was abandoned due to public opposition.

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