The Korean government said Monday it would crack down on stores selling tobacco in bulk this month in the lead up to the Jan. 1 price hike. Proprietors caught selling large volumes of cigarettes will face up to two years in prison or a 50 million won ($45,000) fine.

The announcement came after the ruling and opposition parties agreed last Friday to raise tobacco prices by 2,000 won. This was the first hike since the government raised the price by 500 won in 2004. 

With just a month left before the price hike, a large number of smokers across the nation are expected to begin stockpiling cigarettes. Sales have surged in the last two months since the Health Ministry released its plans to raise tobacco prices in an emergency meeting with economy-related ministers in September.

The Trade Ministry said tobacco sales rose 12.1 percent and 5.9 percent in September and October, respectively, compared to the same period last year. Since the two main parties reached an agreement on Friday, tobacco sales at GS25, Korea’s largest convenient store chain, have risen 25.2 percent from the previous week.

Experts blamed the government for the hoarding, pointing to the monthlong grace period following the agreement between the political parties.

“The government has proven to be ignorant of the market mechanism, as it is basically giving people a chance to break the law and buy cigarettes in bulk,” said Kim Jong-seok, a business professor at Hongik University.

Some opponents of the price hike say it will increase the burden on low-income earners. According to the National Assembly Budget Office, raising the price will bring in 5 trillion won in tax revenue, which is almost double the government’s conservative estimate of 2.8 trillion won.

The government intentionally lowered its own estimate to avoid criticism that it was saddling low- and middle-income earners with more taxes, industry watchers said.

“Low-income earners have little more than tobacco for enjoyment compared to the high-income groups, who have more resources,” said Yoo Jong-il, an economics professor at the Korea Development Institute School. “The price hike would therefore place a bigger price on them, without having too much of an impact on their health or cigarette consumption.”

By Shin Ji-hye (shinjh@heraldcorp.com)