Don’t Push a Tobacco Tax Increase

There is growing concern that the government may raise cigarette prices. In the industry, there is speculation that a price hike will be decided next year and take effect the year after. Some have also suggested that it will be announced after the general election. Since this was an issue even the previous Moon Jae-in administration abandoned out of concern over public backlash, attention is focused on whether the current government will actually push ahead with a cigarette tax increase.

The tobacco business has a monopolistic structure and is, in effect, under government influence. For smokers, cigarettes are a daily expense, closely tied to the cost of living. With consumer prices already rising at a serious pace, a cigarette price increase could be devastating for ordinary people. Considering that the current inflation is the result of the government’s excessive spending and overissuance of money, it is unreasonable for the government to pass this burden on to the public.

Taxes account for the vast majority of cigarette prices. Cigarette prices include tobacco excise tax, individual consumption tax, local education tax, value-added tax, and the national health promotion charge. The government seems to regard cigarette consumers as easy targets. It acts as if, because it holds the power to determine prices, it can raise them whenever it wants. If the intent is to increase government revenue by raising taxes, that is wrong. It is deeply problematic to try to refill state coffers depleted by reckless government spending through higher taxes.

It is wrong in itself to impose excessive taxes on a particular discretionary product. There is no reason to discriminate against cigarette consumers compared with other consumers and burden them with especially heavy taxes. In particular, cigarette consumers purchase cigarettes habitually, so even if prices rise, it is difficult for them to find substitutes. In other words, raising prices does not easily reduce consumption; it only increases the financial burden.

Some ask what is wrong with imposing taxes for health reasons. Regardless of whether smoking is bad for one’s health, there is no reason for a third party to interfere. Health is something each individual should take care of and prepare for. If an individual’s medical expenses are expected to become a burden, that should be addressed through insurance and reflected in the system. This is not something that can be solved by government coercion through taxation.

Above all, there is no reason for the government to decide on people’s behalf which discretionary products they should choose. The government itself is incapable of maintaining its own fiscal soundness. Looking at the projects of the Ministry of Health and Welfare, including those related to tobacco, it is pursuing bureaucratic expansion without any real policy effect. In short, the interference is excessive. It claims to be acting in the name of public health, but most of what it is doing is simply expanding government control. It has long since degenerated into a symbolic ministry of bureaucracy and interventionism.

Many people express disgust toward tobacco. I do as well. I do not smoke, and I avoid it even when I merely smell it. Even so, it is by no means desirable to turn tobacco into a symbol of the “enemy of health,” impose excessive taxes on it, and use it as a means of securing government revenue.

A cigarette tax increase must not be pursued. At a time when the aftereffects of reckless fiscal policy are producing an economic slowdown and causing price instability, considering a tax increase is something the government should not do.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: 담배세 인상 추진 안된다

Author: Sung-no Choi

Date: 2023-12-05

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=26260