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The proposal of the Ministry of Health and Welfare to raise tobacco price aims to reduce smoking and improve population health.
The objective of the Ministry of Health and Welfare's (MOHW) proposal to raise tobacco price is to decrease smoking and improve health. The MOHW wants to allocate the entire revenue from
price increase to health promotion fund.
The increase in tobacco tax is expected to affect smokers through financial incentives. If smoking declines after the increase in price, tobacco farmers and tobacco industry will experience some loss of revenue. Revenue of local governments will also be affected by the decrease in tobacco consumption because tobacco consumption tax is mainly in the jurisdiction of local governments in Korea.
The decision to take a tighter policy on tobacco tax was presented following a 2003 WHO congress encouraging member states to take active measures against the increasing smoking "epidemic", both to reduce health damages and to curb the economic burden of smoking-related illness.
To reduce smoking and improve health.
Price and financial incentive
smokers, tobacco farmers and industry, local government (due to the decrease in consumption tax revenue)
|Medienpräsenz||sehr gering||sehr hoch|
The objective of the proposed policy is clear and supported from a public health perspective. But the Ministry of Finance and Economy, which is the most powerful ministry in Korea and is
responsible for tax policy, has a different perspective from the Ministry of Health and Welfare.
The policy debate associated with raising tobacco price in Korea shows the importance of the political process (particularly bureaucratic politics among government ministries) and interest groups in health policy making.
After attending the WHO congress of May 2003, which strongly recommended more active policy against smoking, the Minster of Health and Welfare said that tobacco price should be raised to reduce smoking. As a former faculty member of a school of public health, the minister of health and welfare has a keen interest in health promotion.
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The minister of health and welfare along with scholars in public health have generated the idea of raising tobacco price. They think that tobacco price in Korea (1.3-2.0 USD per pack) is too low,
smoking has a serious effect on health, and raising tobacco price will to a great extent contribute to reducing its consumption and improving population health.
Ministry of Health and Welfare proposed to raise the health promotion tax from current level of 0.1 USD to 2 USD per pack.
The approach of the idea is described as:
Public health groups including Alliance for Smoking Cessation, Korean Pharmaceutical Association, and Korean Dental Association have supported the proposal of the Ministry of Health and
However, Ministry of Finance and Economy has strongly opposed the proposal, arguing that the increase in tobacco price will have a negative impact on economy because of its inflationary pressure and also have a negative impact on the fiscal status of local governments because a decrease in tobacco consumption will reduce tax revenue for local governments. (Tobacco consumption tax is currently about 0.5 USD per pack and is a major revenue source for local governments.) The Ministry of Finance and Economy has also questioned the impact of the price increase on tobacco consumption.
KT&G (Korea Tobacco and Ginseng), the public enterprise monopolizing the production of tobacco in Korea, opposed the proposal of the Ministry of Health and Welfare, too. Local governments, smoker consumer association and tobacco farmers' association also opposed the proposal.
There have also been hot debates on the amount of price increase and how to use the increased revenue from price change. In terms of the level of price increase, the Ministry of Finance and Economy maintains that the USD 1-2 increase is too high and it should be increased by a much smaller amount and in a incremental way.
The Ministry of Health and Welfare originally wanted to allocate the increased revenue from price increase to overall health promotion and extension of public health facilities. Facing strong oppositions, Ministry of Health and Welfare later says that the increased revenue will be prioritized to smoking-related health promotion in addition to overall health promotion programs. It is also likely that only the half of the amount of price increase is allocated to the Ministry of Health and Welfare and another half will be allocated to local governments and tobacco farmers.
The proposal of the Ministry of Health and Welfare has not yet led to legislation.
Ministry of Finance and Economy and Ministry of Health and Welfare have agreed that in principle tobacco price will be raised. But the level and timing of the increase and how to use the additional fund from the price increase is still in discussion. In a sense they deliberately deferred its decision. It will be finalized after the General Election of April 15, 2004.
If adopted, raising tobacco tax will conribute to reduction in smoking and improvement in heath. However, the extent of change in smoking will depend on the amount of tax increase and degree of responsiveness of smokers to the price change.