SEOUL (Reuters) - South Korea on Thursday proposed a tax hike as early as next year that would nearly double cigarette prices as the government tries to reduce one of the world’s highest smoking rates among adult males.
The proposal, which needs to be approved by parliament, sent shares in dominant tobacco maker, government-backed KT&G Corp, down more than 5 percent.
It was also immediately criticized by the main opposition party, highlighting the difficulty in implementing anti-smoking regulations in a country where the health risks associated with smoking are not widely publicized.
The proposal calls for a more than 100 percent tax increase on a pack of cigarettes, which would double current prices that range between 2,000 won and 2,500 won ($1.9-$2.4) - far less than the $12 per pack that smokers pay in Australia, which recently toughened its anti-smoking laws.
The initiative also suggested banning cigarette advertisements in convenience stores and making graphic warning labels on cigarette packs mandatory.
KT&G, which sells 60 percent of all cigarettes bought in the country, declined to comment on the tax proposal.
South Koreans are among the heaviest smokers in the world: just under half of all adult males smoke, government data shows, compared to an average of 25.4 percent in the 34 countries that are members of the Organisation for Economic Cooperation and Development.
The government said it expected higher cigarette prices to deter teenagers from picking up the habit, as research showed youth were up to four times more price-conscious than adults.
The proposal, however, is likely to face an uphill battle in parliament after the main opposition party, the New Politics Alliance for Democracy, dismissed it.
“It is a trick to make up for the revenue shortage by emptying the pockets of working-class people and smokers,” party spokesman Kim Young-geun told reporters in parliament. The tobacco tax could boost tax revenue by 2.8 trillion won ($2.7 billion) per year, the government said.
A Seoul-based official at a foreign tobacco company also criticized the proposed price increase.
“The one-off drastic price hike like this is unlikely to result in the (intended) drop in the smoking rate while at the same time creating many side-effects such as smuggling and fake tobacco products,” the executive said, declining to be named due to the sensitivity of the matter.
($1 = 1,035.3000 Korean won)
Editing by Tony Munroe and Miral Fahmy