According to South Korea’s Ministry of Administrative Security, vape tax revenue will increase by nearly 20 percent in 2023, but 90 percent of synthetic tobacco tar products on the market are not taxed because they are not included in cigarettes, forming a tax blind spot.
Tax revenue from vapes will increase by nearly 20% in 2023
According to a report by Ftoday on Sep 19, recent data shows that the excise tax on traditional cigarettes in South Korea is declining, while the excise tax on vapes is increasing significantly.
Information obtained by the Ministry of Public Administration and Security by Rep. Wei Sung-gon of the main opposition Minjoo Party on Monday. The consumption tax on cigarettes in 2023 will be 3.744 trillion won, slightly lower than the 3.7424 trillion won of the previous year.
According to local tax laws, cigarette excise tax is a tax on the production or import of tobacco goods, which is collected by local governments from cigarette manufacturers and purchasers. However, because cigarette excise taxes are included in the price of tobacco, smokers bear this tax.
Depending on the category, the excise tax rate for cigarettes is generally 1,007 won per 20 cigarettes, 628 won per milliliter for vapes, and 897 won per 20 cigarettes for tobacco vapes.
The tobacco excise tax on traditional tobacco will decrease from 3.1235 trillion won in 2021 to 3.1046 trillion won in 2022 and further to 2.9837 trillion won in 2023. In contrast, the tobacco excise tax levied on vapes increased by 26.6 percent from 503.3 billion won in 2021 to 637.4 billion won in 2022. Compared to the previous year, it will further increase to 759.7 billion won in 2023
Synthetic nicotine is a tax blind spot
However, Wi Lien, a lawmaker from the Democratic Party of Korea, pointed out that “the data shows that the tax increase on vapes is obvious, but it does not fully reflect the reality.” Currently, synthetic tobacco tar vapes, which make up 90 percent of the market, are not considered cigarettes under current law, so they are in a complete tax blind spot.
According to the working method of cigarettes, only products that use cigarette leaves and natural smoke tar as raw materials are recognized as cigarettes. Synthetic cigarette tar vapes made using chemical synthetic materials are not classified as cigarettes and therefore are not subject to cigarette excise tax, personal excise tax, local education tax and value-added tax.
The lawmaker called for a comprehensive consideration of the definition of cigarettes, tax standards, tax rates, and other factors to develop a response strategy.
