The South Korean government was forced on Monday to threaten draconian action against tobacco retailers that might be tempted to sell large numbers of cigarettes ahead of a tax-led January 1 price hike, according to a story in The Korea Times.
The government said it would crack down on stores selling tobacco ‘in bulk’ this month. Proprietors caught selling large volumes of cigarettes would face up to two years in prison or a WON50 million ($45,000) fine.
The market faces a turbulent time with prices rising by up to 87 percent. In the first increase in 10 years, cigarette prices are set to rise by WON2,000 ($1.80) per pack to between about WON4,300 and WON5,000 per pack.
Sales have surged during the past two months since the Health Ministry released in September its plans to raise tobacco prices.
The Trade Ministry was quoted as saying that tobacco sales rose by 12.1 percent and 5.9 percent in September and October respectively, compared with sales during the same months of last year.
And since the country’s two main parties reached an agreement on Friday to raise prices, tobacco sales at GS25, Korea’s largest convenience store chain, have risen by 25.2 percent from those of the previous week.
According to the National Assembly Budget Office, the price hike will bring in WON5 trillion in tax revenue, which is almost double the government’s estimate of WON2.8 trillion.
But some observers have accused the government of lowering its own estimate to avoid criticism that it was saddling low- and middle-income earners with more taxes.
“Low-income earners have little more than tobacco for enjoyment compared to the high-income groups, who have more resources,” said Yoo Jong-il, an economics professor at the Korea Development Institute School. “The price hike would therefore place a bigger price on them, without having too much of an impact on their health or cigarette consumption.”