Korea’s cigarette sales rebounding

Sales of cigarettes in South Korea during the first nine months of this year, at 2.76 billion packs, were up by 13.3 percent on sales during the same period of 2015, according to a story by Kim Young-Nam for Joong Ang Ilbo, citing figures from the Ministry of Strategy and Finance.

An increase was to have been expected because the government hiked cigarette taxes at the beginning of January 2015, raising retail cigarette prices from 2,500 won ($2.20) a pack to 4,500 won.

The tax increase was said at the time to have been aimed at reducing the number of smokers in the country and the government believes that this has happened. “The year-on-year rate rose, as there was a sharp drop in consumption in early 2015,” said Kim Wi-jung, a director at the Finance Ministry, “but the figure for the third quarter shows that it didn’t grow compared to the previous year and that it appears the price increase is clearly lowering the number of smokers. The year-on-year growth rate is slowing and we believe this suggests consumption is dropping, as well.”

But Park Young-sun, a lawmaker from the opposition Minjoo Party, has argued that the government’s decision to raise the price of cigarettes has had no impact on consumption in general. ‘The government has been saying that the price hike is dragging down consumption,’ said Park in a press release earlier this month, ‘but the data shows it’s actually growing compared to the last year.’

Park’s data, which she says she obtained from the Korea Customs Service, shows that cigarette sales from Korea’s duty-free stores increased by 40.3 percent to 211.1 million packs in 2015 compared to sales during the previous year.

And the figure for this year up until August also increased by 27.4 percent year-on-year to 155.3 million packs.

Park said that this wasn’t the only ‘detrimental’ result of the price hike. ‘Tobacco companies have made tremendous profits by storing tobacco before the price increase in order to avoid paying higher taxes,’ she wrote.

Tobacco companies in Korea have allegedly avoided more than 200 billion won in taxes by selling tobacco manufactured before the new price went into effect.

And whereas the government last year seized cigarettes worth 3.64 billion won as they were being smuggled into the country; this year, through June, cigarettes worth 6.66 billion won were seized.

One industry insider who has been dealing with illegally distributed tobacco for about 20 years said tobacco smuggling methods were becoming more sophisticated.