Korean committee backs huge hike in e-cigarette tax

By Chyung Eun-ju

A Korean parliamentary committee has endorsed a bill to raise the tax on heat-not burn (HNB) cigarettes, also known as e-cigarettes.

The proposed rise is 90 percent, which would increase the price of e-cigarettes -- like Philip Morris “Heets” and BAT “Neostiks” -- from 4,300 won ($3.78) to 5,000 won a pack.

Heets’ original price includes a 1,739.6 won tax. Most tobacco cigarettes sell for 4,500 won a pack, of which 3,323 won is tax.

The National Assembly’s Strategy and Finance Committee passed the revision bill to the tobacco tax code Friday. If the bill passes a parliamentary plenary session, the higher tax will start mid-December.

Until now, Korea had categorized e-cigarettes differently from tobacco cigarettes, allowing Philip Morris Korea’s iQOS and BAT Korea’s Glo, which are heating devices for e-cigarettes, to be taxed at a lower rate. E-cigarettes are taxed at around 52 percent of conventional cigarettes.

Philip Morris Korea, a dominant player in the industry, said the tax hike will inevitably push up the retail price of iQOS. The company did not say by how much but industry sources said it will most likely go over 5,000 per won a pack.

A BAT Korea official said: “If the tax increases, it will have a huge impact on the cost, so we will have to think about increasing our prices as well.”

Leading Korean cigarette producer KT&G also expressed concern about the pricing of its new tobacco heating device, dubbed LiL. The company said it is thinking of selling it for over 4,000 won.

But the Minister of Strategy and Finance, Kim Dong-yeon, said the chance of a price hike is low.

“In Japan, the tax levied on e-cigarettes is 80 percent of regular cigarettes and the former is sold for 460 yen, which is similar to the regular ones,” Kim said.

Rep. Kim Gwang-lim of the major opposition Liberty Korea Party presented a proposal in June to raise the tax on e-cigarettes due to concerns they also emit harmful substances like regular cigarettes.