South Korea Loses $2.5 Billion Due To Synthetic Nicotine Tax Loophole, Congress Promises Emergency Law Amendment

South Korea loses $2.5 billion due to synthetic nicotine tax loophole, Congress promises emergency law amendment

Synthetic nicotine has not been taxed for four years, amounting to $2.5 billion. The synthetic nicotine market may become a "paradise" for international tobacco giants, and the Korean legislative amendments are being reviewed slowly, with the National Assembly promising to seek emergency treatment to fill the loopholes.

According to Daum News on October 8, due to legislative gaps, the amount of money that South Korea has failed to tax synthetic nicotine e-cigarettes in the past four years is estimated to be as high as 3.3895 trillion won (US$2.5 billion). This is mainly because natural nicotine e-cigarettes with similar ingredients have become taxable since 2021, while synthetic nicotine has been excluded.

On the 8th, Song Eon-seok, chairman of the Planning and Finance Committee of the National Assembly of South Korea, analyzed the data of the Ministry of Planning and Finance, the Customs Service, the Food and Drug Safety Department, and the Electronic Cigarette Association and found that the taxes that have not been levied on synthetic nicotine e-cigarettes have increased year by year since 2021, and they are 535.8 billion won (about US$400 million), 989.1 billion won (about US$700 million), 1124.9 billion won (about US$800 million), and 739.7 billion won (about US$550 million) by August 2024.

Currently, e-cigarettes using synthetic nicotine are not considered tobacco under current laws, so there is no relevant tax policy. Due to legal loopholes, South Korea may become a "paradise" for international tobacco companies. British American Tobacco (BAT) is expected to release synthetic nicotine e-cigarettes in November, choosing South Korea as the first market.

In the 22nd National Assembly, five amendments to the Tobacco Business Act, including the inclusion of synthetic nicotine e-cigarettes in the scope of taxation and regulation, are under review, but progress is slow. Chairman Song, who is in charge of preparing the amendment, said that the tax and regulatory gaps caused by synthetic nicotine e-cigarettes will be resolved quickly.