Gov’t considers raising taxes on e-cigarettes

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Gov’t considers raising taxes on e-cigarettes

The government is considering changing taxes on electronic cigarettes, tightening its grip on the growing sector amid increasing concerns over health effects.

According to the Ministry of Economy and Finance on Monday, outside research is currently underway to check whether current taxes on cigarettes are levied based on fair standards, especially on liquid-type e-cigarettes such as Juul that are currently taxed at less than half the rate on traditional cigarettes.

Korea categorizes cigarettes into three types: traditionally-lit cigarettes, devices that heat tobacco, such as Philip Morris’ Iqos, and devices that use liquid-nicotine cartridges.

Heated tobacco cartridges for e-cigarette devices are levied at a flat 90 percent of the tax rate on traditional cigarettes, while cartridges for liquid-type e-cigarettes are levied based on nicotine content.

As these cartridges have a relatively low nicotine content, this leads to a tax rate at 43.2 percent that of traditional cigarettes.

The research, which the Finance Ministry said is not intended to raise taxes, will be completed by December and tax changes based on the research results will be discussed next year with other government branches such as the Ministry of Health and Welfare.

The Finance Ministry said that an “objective standard” needs to be created, while explaining that it is difficult to outright say that taxes on liquid-type e-cigarettes are lower as the standards for taxation are different.

It added that it is not considering changes to taxes on traditional cigarettes.

E-cigarette sales have rapidly increased in recent years.

While e-cigarettes had only a 2.2 percent market share in 2017, that had jumped up to 9.6 percent as of last year. The market share of e-cigarettes in the first half of this year stood at 12 percent, propelled by the growing range of products such as Juul, which launched in Korea in May.

The government’s review of tax rates comes days after it recommended against the use of liquid-type e-cigarettes.

Following a similar measure by the U.S. government this month and movements in the U.S. retail sector to stop sales of the devices, Korea’s Ministry of Health and Welfare said last Friday that it would recommend against using liquid-type e-cigarettes until further research into their relation to respiratory disease is conducted.

BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]

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