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Economy

Cigarettes nearly double in price

South Korea's tobacco tax hike has increased the price of cigarettes to about 4,500 won per pack.

SEOUL -- January's tobacco tax increase in South Korea, the first in a decade, has pushed up the price of Marlboro cigarettes by a record 2,000 won ($1.84) to 4,500 won, higher than major Japanese brand Mevius, which cost 430 yen ($3.55) in Japan. The significant price rise will severely hurt the pockets of many South Korean smokers.      

     An official from a South Korean union for tobacco consumers said the increase will see each smoker spend an extra 700,000 won a year. The group is critical of the raise, saying it is almost equivalent to the annual earned income tax paid by a worker on 45 million won per year.

    Deputy Prime Minister and Minister of Strategy and Finance Choi Kyung-hwan said the main purpose of raising the tax was to benefit the nation's health, not to increase tax revenue. According to the South Korean government, 43.7% of adults smoke, the highest among Organization for Economic Cooperation and Development countries. Before the hike, the average price of a packet of cigarettes was 2,500 won, the lowest in the OECD. 

     According to Yonhap News Agency, when the cigarette tax was raised by 500 won in 2004, sales fell by about 26% in volume. It is estimated that this hike will cut sales by about 20%.

     The public also seem to favor the raise. A survey by the union shows 66.3% of those questioned support the tax hike, while 33.7% oppose it.

     However, unfortunately for the government, taxpayers are particularly sensitive to any tax increase at the moment, as tax refunds are expected to be slashed significantly due to a recent change in the income tax deduction system. Members of the New Politics Alliance for Democracy, the largest opposition party, have criticized President Park Geun-hye for the confusion over the increased tax.

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