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National Tobacco
Control Center

Tobacco taxation in Korea

Tobacco tax and price in Korea

The first tobacco excise taxes in Korea were adopted in 1989(KRW 360 per pack). Since then, tobacco prices have risen gradually within narrow range. After the last revision of tobacco prices in 2004, South Korea has maintained its price of KRW 2,500 per pack for the following 10 years. In order to reduce deaths due to smoking, which reaches 58,000 every year, and cut down smoking rates of adult men to 29%, The Ministry of Health and Welfare, the Ministry of Strategy and Finance and the Ministry of the Interior have announced a national tobacco control plan in September 2014, in which tobacco excise tax raise was included. Since January 1st 2015, the average tobacco price was raised from KRW 2,500 to 4,500, making the tobacco tax rate increased from 62.0% to 73.8%, close to WHO's recommendation (75%).

[Changes in tobacco taxation and price, 1998~2015]

(Unit: KRW/Pack)

  Tobacco
Excise
Local
Education
Tax
Charges
for public
service
Charges
for waste
Charges
for national
health
promotion
Tobacco
stabilization
fund
Individual
consumption
tax
VAT Total
dues
charges
(A)
Sales
price
(B)
Taxation
rate
(A/B)
’89.1. 360               360 600 60.0%
’94.1. 460   20           480 700 68.6%
’96.7. 460 184
(Education
tax)
            644 900 71.6%
’97.1 460   4         648 900 72.0%
’97.5. 460   4 2       650 1,000 65.0%
’99.1. 460   4 2     100 750 1,100 68.2%
’01.1. 510 255   4 2     118 889 1,300 68.4%
’02.2. 510 255   4 150 10   181 1,110 2,000 55.5%
’05.1. 641 321   7 354 15   227 1,565 2,500 62.6%
’08.1. 641 321   7 354     227 1,550 2,500 62.0%
’15.1 1,007 443   24 841 5 594 409 3,323 4,500 73.8%
  • Note: Sales price is based on the most consumed tobacco product. In another previous literature, the sales prices changed from KRW 1,500 to KRW 2,500 in 2004 because the baseline tobacco product was changed from THIS (KRW 1,500) to ESSE (KRW 2,500).

Effect of tobacco tax increase in 2015

According to the Ministry of Strategy and Finance, the tobacco output, the amount of cigarettes carried out from the factory plus the amount of imported tobacco products, decreased by 29.6%, from 4.5 billion packs in 2014 to 3.17 billion packs in 2015. In addition, sales volume of cigarettes decreased by 23.7% (1.03 billion packs), indicating that cigarette consumption has significantly decreased after the tobacco tax increase in 2015. Smoking status survey after 6 months of the tobacco price hike conducted by the Ministry of Health and Welfare and the Center for Disease Control showed that smoking rates of male adult dropped to 35%, 5.8%p lower than 2014. About 6% of current smokers answered that they tried to quit within one year before and after the tobacco price hike, and most of them (62.3%) decided to quit smoking due to price increase. In addition, 23.5% of male smokers said that they smoked less after price increase. Moreover, the smoking rate of youth recorded the lowest in 10 years. Current smoking rate of middle and high school students was 7.8% in 2015, showing a 15.2% decrease compared to 2014.

National Health Promotion Fund

Korea imposes National Health Promotion Charges on tobacco product in order to create the National Health Promotion Fund. 25.3% of tobacco taxes are earmarked for public health including tobacco control policies. In 1997, Health Promotion Charges of KRW 2 per pack was imposed on tobacco product. Since then, the Charges has been raised to KRW 150 in 2002, KRW 354 in 2005 and KRW 841 in 2015 for cigarettes and the similar rates of charges were imposed to e-cigarettes(in 2011) as well as other types of tobacco products(in 2014). National Health Promotion Fund increased by 530%, from KRW 23.5 billion in 2014 to KRW 147.5 billion in 2015 due to tax increase.

National Health Promotion Act Article 25 (Use of Fund, etc.)

  • (1) The Fund shall be expended for the following projects:
  • 1.Health management projects for smokers such as anti-smoking education, advertisement, etc.;
  • 2.Projects for supporting healthy life style;
  • 3.Health education and development of its materials;
  • 4.Preparation and distribution of health statistics and projects for survey, research and development in health care;
  • 5.Projects for prevention, diagnosis and management of diseases, and treatment of cancer;
  • 6.National Nutrition Management Projects;
  • 7.Oral cavity health management projects;
  • 8.Health promotion projects performed by Mayors/Do Governors and the heads of Sis/Guns/Gus;
  • 9.Expansion of facilities and equipment for public health care and health promotion;
  • 10.Expenses necessary for management and operation of the Fund;
  • 11.Other expenses necessary for the national health promotion projects which are prescribed by Presidential Decree.