Gov't to collect more taxes as e-cigarettes are legally classified as tobacco

A revised amendment to the Tobacco Business Act is endorsed during a plenary session at the National Assembly in Yeouido, Seoul, Tuesday. Yonhap

A revised law to include e-cigarettes in tobacco taxation is fueling optimism that the government can collect more taxes as it struggles to finance expansionary fiscal policies, officials said Wednesday.

On Tuesday, the National Assembly approved a revision to the Tobacco Business Act that expands the legal definition of tobacco to include synthetic nicotine, following a bill submitted in September.

Previously, the law defined tobacco products as those derived from tobacco leaves, excluding synthetic nicotine — a lab-produced chemical commonly used in e-cigarettes.

Under the revision, the government can now levy tobacco taxes on e-cigarettes, which officials estimate could generate about 1 trillion won ($680.9 million) per year, considering the tobacco tax accounts for roughly 74 percent of the price of a regular cigarette pack.

“The definition has now been expanded to include all parts of the tobacco plant — leaves, stems, and roots — as well as nicotine, both natural and synthetic,” the Ministry of Economy and Finance said in a press release. “Accordingly, synthetic nicotine for e-cigarettes will be subject to the relevant regulations.”

The ministry said the tobacco tax on e-cigarettes will be imposed after a grace period, possibly two years.

The revision comes after a national tax shortfall of 56.4 trillion in 2023 and another 30.8 trillion in 2024.

Although cumulative national tax revenue reached 330.7 trillion from January to October this year, up 12.6 percent from a year earlier, officials said additional revenue is needed to fund the government’s expansionary fiscal policies.

The National Assembly approved a 2026 national budget of 727.9 trillion won on Tuesday, up 8.1 percent from this year.