Company team building hit by cigarette price hike

The massive tobacco-product tax increase imposed in South Korea on January 1 has had considerable repercussions, at least one of which was probably not foreseen, according to a story in The Korea Herald.

Anecdotal evidence suggests that there might have been a reduction in the number of company dinners being held as team-building exercises. This is because the consumption of alcohol, an important feature of such ‘hoesik’, makes it more difficult for those who quit smoking in response to the tax and price increase to maintain their resolve.

During the first fortnight of 2015, the price of many local cigarettes jumped from WON2,500 ($2.30) to WON4,500 ($4.15) a pack.

The huge increase has been particularly disruptive because it was brought in against a backdrop in which there had been no price increases for about 10 years.

The Herald story said the ugly side effects of the tobacco tax policy had included the personal use of corporate credit cards for buying cigarettes, illegal cigarette sales online, and increasing visits by non-smoking travelers to the cigarette sections of duty-free shops.

The last two effects mentioned here cannot have come as a surprise. Current duty-free prices for popular brands of cigarettes range from $18 to $19 a carton, while the same cigarettes bought in a normal outlet in Korea retail for $41.

Some illegal online cigarette sales have involved people of previously good character who hoarded the products before the price rise and who possibly did not realize that only state-authorized retailers could sell tobacco products.