Smokers adjust to higher prices

The production and import of cigarettes has rebounded in South Korea following falls caused by a tax hike in January 2015 that almost doubled retail prices, according to a story in The Korea Times.

Figures from the National Assembly Budget Office have indicated that the number of cigarette packs produced in the country and imported into it during the first quarter of this year increased by 60 percent year-on-year, from 521 million packs to 834 million packs.

The level of local production and imports now stands at about 90 percent of that of August 2014, the month prior to when the government announced its plan to raise prices by 2,000 won ($1.74) a pack.

When the government announced in September its plan to increase prices, the number of cigarette packs produced and imported increased hugely, and to 578 million in that month alone.

But the number plunged to 159 million in January last year when the new prices came into force, about half that of January 2014.

The price rise, which the government claimed was aimed at curbing the nation’s smoking rate, seemed initially to meet its goal, with the number of cigarettes sold in the first quarter of last year decreasing by 43.9 percent, from 930 million during the first quarter of 2014. However, the volume steadily increased to the current level as “disturbances from the price hike were soothed,” the budget office said.

And the increase in cigarette volume has contributed to a surge in tax revenue from tobacco. Last year tax revenue stood at 10.5 trillion won, up 3.6 trillion won from the year earlier, surpassing the government’s prediction that an additional 2.8 trillion won would be raised after the price hike.

The budget office expects that cigarette tax revenue will increase this year. “As the effect of price policy slows, another increase in revenue is expected,” an official said