South Korea Urges Taxation of Synthetic Nicotine E-Cigarettes
The National Assembly Research Service has released a report advocating for the taxation of synthetic nicotine e-cigarettes, citing concerns over tax equity and public health. The report, titled “Issues and Improvement Measures Related to E-cigarette Regulation,” calls for amending the legal definition of tobacco to include raw materials such as nicotine, regardless of the manufacturing method, and implementing an integrated taxation system.
Currently, synthetic nicotine e-cigarettes are exempt from excise tax, as they do not use tobacco leaves, which are defined as the raw material for tobacco products under the Individual Consumption Tax Act. This exemption has led to a significant loss in tax revenue, with uncollected taxes from synthetic nicotine products estimated at 3.3895 trillion won over the past four years, according to People Power Party Representative Song Eon-seok.
The Ministry of Economy and Finance has acknowledged the need for regulating synthetic nicotine, and discussions on amendment bills have begun in the National Assembly’s Strategy and Finance Committee. However, progress has been delayed due to political turmoil following the state of emergency declared on December 3, 2024.
Beyond the issue of lost tax revenue, the Research Service emphasizes the urgent need for regulation due to public health concerns. As synthetic nicotine is not legally classified as tobacco, it is not subject to the same regulations as conventional cigarettes under the Tobacco Business Act. This means that synthetic nicotine e-cigarettes can be freely sold online and through vending machines, lack required warning labels, and can be legally sold to minors, making them an “entry-level” product among teenagers.
The Research Service warns that the use of synthetic nicotine-based e-cigarettes can lead to nicotine addiction and potentially transition users to tobacco-based e-cigarettes or combustible cigarettes. The report stresses the need to discourage youth from initiating e-cigarette use.
Globally, 34 countries have banned the sale of liquid e-cigarettes, and 121 countries have implemented measures such as advertising restrictions or taxation. The United States has classified synthetic nicotine as tobacco since April 2022 and prohibited sales to individuals under 21.
When determining tax rates for e-cigarettes, including those containing synthetic nicotine, the Research Service advises a cautious approach. While higher tax rates may prevent non-smokers, particularly youth, from taking up e-cigarettes, they may also deter combustible cigarette users from switching to less harmful e-cigarettes. The report recommends considering scientific evidence on the relative harm of different tobacco products, effects on smoking reduction rates, impacts of switching from combustibles to e-cigarettes, and industry burden when setting tax rates.
As the National Assembly continues to grapple with the issue of regulating and taxing synthetic nicotine e-cigarettes, the focus remains on striking a balance between promoting public health, reducing smoking rates, and ensuring tax equity in the rapidly evolving e-cigarette market.
- News source: 입법조사처 “합성니코틴 전자담배도 담뱃세 거둬야”
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