The Korea Herald

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[Editorial] Cost of lighting up

More tobacco taxes should be used for antismoking efforts

By Korea Herald

Published : Sept. 19, 2014 - 21:01

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The health of Korean men is at great risk. So found a Korea Centers for Disease Control and Prevention report on the health and nutrition of Koreans in 2013 released earlier this week.

The annual report found that about half of Korean men in their 30s and 40s smoke. With 42.1 percent of adult males smoking, the country has the second-highest rate of smokers among OECD countries.

The rate of male smokers among the high-income group stood at 36.6 percent while the rate for those in the low-income group was 47.5 percent. The incidence of lung diseases among smokers who puffed more than 20 cigarettes a day was 16.3 percent while that for lifetime nonsmokers stood at 6.3 percent. The report also showed chronic ailments, such as obesity, hypertension, diabetes and hypercholesterolemia, to be closely related to smoking.

Clearly, smoking is a public health risk that ultimately costs the country in health care and lost productivity.

Last week, the government announced a package of antismoking measures aimed at reducing the smoking rate by 8 percentage points, which included a proposal to raise the price of cigarettes by 2,000 won to 4,500 won next year.

Many, however, believe that the price hike has little to do with lowering the smoking rate and everything to do with increasing tax revenue.

The 2,000 won increase in the price of a pack of cigarettes is expected to bring in 2.83 trillion won in taxes per year, taking into consideration that cigarette consumption will decline by 34 percent after the price hike. While the government claims that bringing in additional tax revenue is unavoidable in its attempt to lower the smoking rate, a look at the breakdown of the various tax categories and levies reveals otherwise.

The biggest beneficiary of the price increase is the central government. For each pack of cigarettes sold, 594 won will go to the central government through the individual consumption tax, newly tacked on to cigarettes. By comparison, the health promotion fund will receive 841 won while the local governments will get 1,007 won in cigarette consumption tax and 443 won in local education tax. The value added tax amounting to 409 won will be split between the central government and the local government, which is entitled to 11 percent of the VAT as local consumption tax.

The use of taxes as a mechanism to curb smoking is a sound one. A report by the U.S.-based Center on Budget Policy Studies states that a review of more than 100 international studies shows that significant increases in tobacco taxes are highly effective in controlling the use of tobacco and lead to improved public health.

However, if curbing the use of tobacco is indeed the goal of the proposed price hike, a greater proportion of the tax revenue should be earmarked for programs that are designed to help smokers smoke less or quit altogether and for health care programs for smokers. Only when this happens will the public concede that the government’s goal in raising cigarette prices is improved public health.