South Korean media reported that there are loopholes in the tax on vapes, and the tax rate of solid and liquid types is 35 times different, which may distort the market distribution. A bill to create a tobacco tar tax is currently being discussed, but solid tobacco tar commodities will become a new way to avoid taxes.
Korean media exposes tax loopholes for vapes
According to KBS News on November 14, due to the different forms of cigarette tar, the tax rate difference of electronic cigarettes may be as high as 35 times, resulting in unreasonable tax.
KBS reporters found that convenience stores can see many disposable electronic cigarette products, that look the same, but the smoke tar inside is not the same shape. One is liquid smoke tar containing nicotine, which is absorbed into the cotton. Another product is solid smoke tar, designed to be combined with nicotine-free smoke oil when smoked.
Liquid vs. solid nicotine tax rates differ by 35 times
“This solid smoke tar cannot be used alone,” the head of the vape industry pointed out. Solid tobacco tar is combined with vapes for the first time.
Both products can provide the equivalent of two packs of regular tobacco tar with a 2mL volume of tobacco oil, but the tax situation is different. Solid vapes are only taxed according to the solid weight of 0.4 grams, and the liquid type is taxed according to the whole bottle of 2ml liquid oil.
According to the excise tax on cigarettes, you have to pay 1,007 won per pack of tobacco. The same amount of liquid vapes cost 628 won, and heating non-combustible products cost about 641 won, but the solid shape is only about 17 won. Even if only within the vape comparison, the tax rate difference will reach 35 times.
Currently, Congress is debating a bill that would impose a tax on tobacco tar. According to media reports, if solid vapes continue to be favored by consumers, even if cigarette tar is taxed, it is possible to avoid taxes through solid classification.
Lee Seong-kyu, director of the Korea Tobacco Control Research and Education Center, said,
- “Because tobacco companies’ strategies cannot be foreseen, this process is bound to repeat itself. Companies will look elsewhere in the market to avoid it.”
