Korea Backtracks on Hnb Tax Increase

The government of South Korea has ditched a plan to raise the tax on heated-tobacco products just two days after the finance minister proposed the measure, reports The Korea Herald.

South Korea currently taxes regular cigarettes at higher levels than noncombustible tobacco products because it considers the former to be more harmful to health.

Combustible cigarettes attract a tax of KRW3,323 ($2.52) per pack, which includes a KRW1,007 tobacco excise tax, a KRW443 education tax, a KRW594 consumption tax, a KRW409 value-added tax, a KRW841 health promotion fee, a KRW24.4 waste charge and KRW5 to support tobacco farmers.

Noncombusted cigarettes, by contrast, are subject to a tax of KRW3,004, which represents 90.4 percent of the taxes imposed on regular tobacco products.

However, on April 17, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho said noncombusted cigarettes “should be treated similarly to regular cigarettes.” 

His comments immediately provoked a public backlash, prompting the government to backtrack. The government “is not currently considering raising the tobacco tax at the moment,” the finance ministry said in a statement on April 19. 

South Korea’s revenue from tobacco products has shrunk in recent years due to declining sales of combustible cigarettes. In 2022, the government collected KRW11.8 trillion in taxes on all tobacco products compared with KRW12 trillion in 2020. While sales of tobacco-heating products increased during the same periods, their comparably low volumes and lower tax rates meant that they did not offset the revenue lost due to declining cigarette sales.