South Korea’s tobacco tax revenue expected to soar next year

Tax revenue from cigarette sales in Korea is expected to reach more than 12.68 trillion won ($10.72 billion) next year, nearly double the increase from 2014, according to a report shown Monday by the independent Korea Federation of Taxpayers.

The Korea Federation of Taxpayers said in its report that the increase is attributable mainly to the sharp tax hike early this year but little reduction in sales volume. The tobacco tax hike was introduced as part of the government’s strategy to reduce the smoking rate in Korea.

The government raised a total of 6.74 trillion won in tobacco tax revenue in 2014 before the tax hike took effect on Jan. 1. This year, it is estimated that the government will collect 11.17 trillion won, up 4.42 trillion won from the previous year. The government had predicted that the tax revenue would increase only by about 2.78 trillion won this and next year, respectively, as sales were expected to drop due to the price hike.

Once the new cigarette pricing went into effect, the price of cigarettes increased to 4,500 won, up 80 percent from the previous 2,500 won. From January to June, the government collected approximately 4.3 trillion won in tax revenue from tobacco sales, up 1.2 trillion won from the year before. During the same period, cigarette sales decreased by 28.3 percent due to the tobacco tax hike.

Although tobacco sales plunged early this year as a result of the sharp price hike, sales have begun to show signs of recovery.