Government argues for higher tax on e-cigarettes

The debate over whether to tax electronic cigarettes at the same level as conventional cigarettes lit up at the national legislature on Monday after the finance minister, Kim Dong-yeon, expressed support for raising the tax.

Before the National Assembly’s Strategy and Finance Committee, Kim denied speculation that the government’s support of raising the tax on e-cigarettes was a ploy to draw more revenue. The cigarettes, which heat up tobacco sticks rather than burn them like conventional cigarettes, have gained wide popularity since their release in May, but they are taxed at a lower rate than regular cigarettes.

“[We are] in a situation where we need to quickly fill the taxation void [of e-cigarettes],” Kim told the legislative committee. “But taxing e-cigarette does not mean the tax will increase significantly.”

Proponents of a lower tax for e-cigarettes argue that it should be applied because they are less harmful than regular cigarettes, but the finance minister said the same taxes apply to all conventional cigarettes regardless of how much harmful materials they contain and the same should follow for e-cigarettes.

“Because there are no official tests on how harmful e-cigarettes are, I agree with the [legislative] subcommittee on taxes to apply the same tax on e-cigarette,” Kim said.

The National Assembly’s tax subcommittee had agreed Wednesday to raise taxes for e-cigarette sticks, and Monday’s finance committee meeting was a follow-up. The subcommittee proposed raising the tax on e-cigarette sticks from 126 won ($0.11) imposed on a pack of 20 to the 594 won currently applied to conventional cigarettes.

The 126 won is the same tax rate applied to liquid nicotine used in vaporizers. But two of the most popular e-cigarette brands in Korea, IQOS and glo, are different in that they use actual tobacco. It has been argued that because the sticks used in IQOS and glo not only look similar to conventional cigarettes and also have the same feeling, the same tax should be applied.

According to the National Assembly’s committee, cigarette manufacturers earn 1,177 won from selling conventional cigarette packs at 4,500 won. In the case of e-cigarettes, the companies rake in more profit from the sticks, 2,560 won for a 4,300 won pack.

E-cigarettes are estimated to account for 1 percent of cigarettes sold in the market, which amounted to 3.6 billion packs last year. It is believed that in a year the government could lose roughly 58 billion won in taxes with the lower tax imposed on e-cigarettes.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]