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South Korea: Tobacco Tax Hike

(Feb. 3, 2015) The price of a typical 20-count pack of cigarettes in Korea went up from KRW2,500 to KRW4,500 (about US$2.30 to $4.15) on January 1, 2015. (Joo-won Chung, Tobacco Price Hike Begets Fresh Uncertainties, KOREA HERALD (Jan. 27, 2015).)

“The increase of 2,000 won includes hikes in the tobacco consumption tax, local education tax, health promotion payment and waste payment altogether.” (Su-Hyun Song & Ho-Jeong Lee, Tax Hike Will Push Price of Cigarette Packs Up 80%, JOONGANG DAILY (Sept 12, 2014).) For example, the following tax changes have been made in the respective laws:

  • The tobacco consumption tax in the Local Tax Act went up from KRW641 (about US$0.59) to KRW1,007 (about US$0.93) per pack of 20 cigarettes. (Local Tax Act, Act No. 84 (Dec. 22, 1949, as amended by Act No. 12855 of Dec. 23, 2014), art. 52, Ministry of Government Legislation website (in Korean) [search by name of act, in Korean].)
  • The local education tax is half the amount of the tobacco consumption tax. (Id. art. 151 ¶ 2 item 4.)
  • The amendment to the Health Promotion Act raised the “health promotion payment” that is imposed on tobacco products from KRW354 to KRW841. (National Health Promotion Act, Act No. 4914 (Jan. 5, 1995, as amended by Act No. 12859 of Dec. 23, 2014), art. 23, Ministry of Government Legislation website, supra.)

In addition, the government has recently imposed an individual consumption tax on tobacco products. The tax amount is KRW594 per 20-cigarette package. (Individual Consumption Tax Act, Act No. 8829 (Dec. 31, 2007, as amended by Act No. 12846 of Dec. 23, 2014), art. 1 ¶ 2, item 6, & annexed table, Ministry of Government Legislation website, id.)

The government also intends to discourage smoking by raising cigarette prices. The proportion of Korean men who smoke was 44% in 2013, among the highest in Organisation for Economic Co-operation and Development countries. (Song & Lee, supra.) In addition to the tax hike, the Health Ministry has taken other measures to reduce smoking, such as expanding smoke-free zones and enforcing fines imposed on persons who smoke inside restaurants. (Chung, supra.)