Legislative Research Office: "Synthetic Nicotine E-Cigarettes Should Also Be Subject to Tobacco Tax"

Under Current Law, Synthetic Nicotine Is Not Classified as Tobacco
Not Subject to Tobacco Regulations or Individual Consumption Tax
Regarded as an "Entry-Level Cigarette" for Teenagers
National Assembly Discussions Stalled Amid Political Turmoil

Electronic cigarette. Photo by Asia Economy DB

The National Assembly has proposed that synthetic nicotine cigarettes should also be subject to taxation. There are calls to urgently address this regulatory blind spot, as it is inconsistent with tax fairness and the harmfulness has been proven.

On the 5th, the National Assembly Legislative Research Office released a report titled "Issues and Improvement Measures Related to E-cigarette Regulation," stating, "The definition of tobacco under current law should be revised to include raw materials regardless of the nicotine manufacturing method, whether tobacco leaves or nicotine," and argued that "taxation needs to be integrated."

Currently, the Individual Consumption Tax Act defines tobacco as "products using tobacco leaves, stems, roots, etc. as raw materials." As a result, synthetic nicotine e-cigarettes that do not use any tobacco at all are exempt from individual consumption tax. The Legislative Research Office's opinion is that tobacco taxes should be unified as this is unfair.

The various levies the state has missed due to the inability to tax synthetic nicotine amount to trillions of won. According to Song Eon-seok, a member of the People Power Party, the estimated unpaid amount for synthetic nicotine over the past four years is 3.3895 trillion won. The unpaid taxes are increasing year by year. In 2021, the unpaid amount was 535.8 billion won, but it rose to 1.1249 trillion won in 2023.

In response to the controversy, the Ministry of Economy and Finance, the competent authority, conveyed to the National Assembly's Planning and Finance Committee at the end of last year that regulating synthetic nicotine is appropriate. With reports emerging that synthetic nicotine is harmful to the human body, discussions on amendments have also begun in the National Assembly's Planning and Finance Committee. However, regulation has been delayed due to political turmoil caused by the December 3 emergency martial law incident.

Legal to Sell to Youth... "Synthetic Nicotine Must Be Curbed"

The Legislative Research Office also emphasizes the urgency of regulation for public health. Since synthetic nicotine is not legally classified as tobacco, it is not subject to the Tobacco Business Act regulations. It can be freely sold online and through unmanned vending machines, and is not subject to cigarette pack warning images and text labels. It is even possible to sell to teenagers. This is why synthetic nicotine e-cigarettes are considered "entry-level" among teenagers.

The Legislative Research Office pointed out, "Not only is synthetic nicotine harmful, but the use of synthetic nicotine-based e-cigarettes can lead to nicotine addiction and potentially lead to the use of tobacco-based e-cigarettes or combustible cigarettes," adding, "It is necessary to suppress the initiation of e-cigarette use among youth and others."

Most countries already regulate synthetic nicotine. The World Health Organization (WHO) recommends that "liquid-type e-cigarettes should be regulated the same as combustible conventional cigarettes." Thirty-four countries have already banned the sale of liquid-type e-cigarettes, and 121 countries have applied measures such as advertising bans or taxation. In the United States, synthetic nicotine has been classified as tobacco since April 2022, and sales to those under 21 years old are prohibited.

However, it was analyzed that a cautious approach is needed regarding the appropriate tax rate. To prevent the influx of e-cigarettes among non-smokers such as youth and to promote public health, tax rates should be raised. But high tax rates deter combustible cigarette users from using e-cigarettes. There is also an opinion that applying a lower tax rate to e-cigarettes, which are less harmful than combustible cigarettes, can reduce smoking rates.

The Legislative Research Office advised, "When determining the tax rate for e-cigarettes including synthetic nicotine, policy judgment should be combined with scientific evidence on the harmfulness of each type of tobacco, the effect of suppressing smoking rates, the effect of switching from combustible cigarettes to e-cigarettes, and the industry's burden due to market shocks."