South Korea's Low Solid Nicotine Tax Draws Criticized for "Ultra-Low Tax Rate" Advantage

Key points:

1.Currently in South Korea, e-cigarette products have significant differences in tax burden based on their internal structure.

2.E-cigarette products containing solid nicotine are taxed based on weight, with significantly lower tax rates than liquid products.

3.Experts point out that this structural difference may weaken the credibility of the tax system and provide some companies with opportunities to avoid taxes.

4.The South Korean government is currently in the process of establishing a new tax system for new tobacco products such as synthetic nicotine, but specific measures for solid products are still lacking.

According to Nate.news on May 13th, issues of regulatory and fairness concerns are being raised in South Korea's e-cigarette market due to discrepancies in the tax system based on product structure, amidst rapid market expansion.

The Center for Tobacco Regulation and Education stated on May 13 that solid nicotine e-cigarette products currently on the market are in a tax loophole, and the current taxation method needs to be adjusted as soon as possible.

Currently, e-cigarette products in the South Korean market are mainly divided into two categories: one type is liquid products with nicotine e-liquid soaked cotton cores, and the other type consists of solid products that combine nicotine in solid form with non-nicotine liquid. This structural difference directly affects the basis for tax measurement and the final tax burden.

E-cigarettes containing liquid nicotine are subject to tobacco consumption tax based on the volume of nicotine liquid they contain, with a tax rate of 628 Korean won per milliliter. For comparison, a pack of traditional cigarettes is taxed at approximately 1007 Korean won (0.7 USD), while an HNBpod with the same nicotine content is taxed at around 641 Korean won (0.5 USD). E-cigarettes containing solid nicotine, on the other hand, are taxed based solely on the weight of the nicotine itself, with the liquid portion used in conjunction not included in the tax base.

For example, a product that combines 2 milliliters of liquid with 0.8 grams of nicotine solid only requires about 70 Korean won (0.05 USD) in taxes; when 10 milliliters of liquid is paired with 2 grams of nicotine solid, the tax amount is approximately 176 Korean won (0.1 USD), significantly lower than other products with equivalent nicotine content.

This tax arrangement results in unequal tax treatment for different products in the market, creating a "structural tax burden loophole". Some experts point out that this not only weakens the fairness and policy consistency of the tax system, but may also have a negative impact on government revenue, and provide some companies with the opportunity to exploit tax avoidance through product design, thereby gaining an unfair advantage in the market competition.

Although the government has begun to discuss a new tobacco product tax system, including synthetic nicotine, there is still a lack of clear mechanisms for regulating and taxing e-cigarettes containing solid nicotine. Industry insiders are calling for simultaneous advancement of detailed institutional reforms.

Director Li Chengkui of the Tobacco Control Research and Education Center stated, "The taxation system for tobacco products not only affects fiscal revenue, but also has a direct impact on the effectiveness of public health policies.