The Effect of Doubling Cigarette Price in South Korea
On September 2014, South Kore proposed a tax hike as quick as next year that would nearly double cigarette prices as the government tries to decrease one of the world's highest smoking rate among adult males. The initiative also suggested prohibiting cigarette advertisements in convenience stores and creating graphic warning labels on cigarette packs required. Despite the immediate opposition underlying difficulties in implementing anti-smoking regulations in a country where the health risks associated with smoking are not broadly exposed, the proposal calls for significant increase in the tax revenue along with the significant decrease in the overall smoking population. Therefore, it is important to analyze on the economic effect and social effect of doubling cigarette price.
Economic impact of Doubling Cigarette Price
The decision involves parliamentary consent, Health Minister Moon Hyung Pyo announced his ministry predicted the increase would benefit cut tobacco intake by 34% and increase yearly tax revenues by 2.8
trillion won. The last time South Korea had revised its tobacco tax was in 2004. Korea in now one of cheapest places to buy cigarettes in the world. Norway has the highest price of $14.40 per pack, followed by Ireland and New Zealand with $11.90, and $11.60 respectively.
As the main reason for the proposal, after doubling current prices that range between 2,000 won and 2,500 won ($1,9-$2.4) to 4,500 won. Besides more than 100 percent tax increase on a pack of cigarettes is expected, residual expected effects of higher tobacco tax are reduced budget deficit, changed economic incentives resulting in lower tobacco smokers, with possible implications for employment and illegal imports, reduced gap between the rich and the poor and changed business environment for the tobacco industry in South Korea. For sales of tobacco, it will show highest...