Smuggling rises on back of price increase talks

The smuggling of cigarettes into South Korea has soared this year, apparently on the back of mere plans to increase the excise duty on tobacco products, according to a story in The Korea Times.

The Times story said that the “value of illegally imported cigarettes from January to February was WON1.16 billion ($1.04 million)”, though it wasn’t clear whether this was an estimate of the total or the level of seizures.

The figure, which was contained in Korea Customs Service (KCS) data released by Kim Han-pyo of the ruling Saenuri Party, was said to be equal to 20 percent of the value of cigarettes smuggled during all of last year.

The KCS estimates that smuggling could be worth WON6.6 billion this year, the highest level in three years. The value of cigarettes smuggled into the country in 2011 was WON5.21 billion; and last year the value of this trade was estimated at WON4.47 billion.

“It seems that the ongoing discussion among officials to raise the cigarette tax is related to the increase of smuggling of the product,” Kim said. “It is highly likely that smuggling will further rise once price hike talks gain momentum.”

Since winning the election last December, President Park Geun-hye has sought ways to supplement the government’s welfare funds.

Her power transition team suggested imposing a higher excise duty on cigarettes.

The price of a pack of local cigarettes currently averages WON2,500, but some government officials have advocated increasing that to WON4,500.