Lawmakers to discuss raising HNB tobacco consumption tax

Lawmakers are set to discuss increasing the individual consumption tax on heat-not-burn tobacco products Tuesday, raising questions about how changing taxes will affect consumer prices of heated tobacco sticks.

“If the consumption tax on heated tobacco sticks rises, we have no choice but to strongly consider raising consumer prices,” said an official of a tobacco company.

Currently, heated tobacco products, including the IQOS system from Philip Morris International and Glo from British American Tobacco, are subject to a lower individual consumption tax than regular combustible cigarettes. 

According to current regulations, the individual consumption tax levied on a pack of cigarettes is 594 won ($0.52), while the tax on heated tobacco sticks is just 126 won -- the standard for pipe tobacco. 

Combined regional and national taxes on a pack of combustible cigarettes total 3,323.4 won compared to 1,739.6 won for a pack of heated tobacco sticks. The consumer price difference between the two types of products is 200 won.

There is currently no legislation specifying a consumption tax level for tobacco-based e-cigarettes such as IQOS and Glo. While some say that the potentially lower health risks of heat-not-burn products should mean a lower consumption tax, others point to the fact that such products have not been proven definitively to be safer than regular cigarettes.

In the case of the IQOS, consumption taxes in other countries range between 12-55 percent of the tax on combustible cigarettes, according to an official with PMI.

The National Assembly is set to discuss proposed legislation that will raise the consumption tax to increase tax revenues from heat-not-burn products. Three proposals have been submitted for consideration, with two proposing to raise taxes on heat-not-burn products to the same level as combustible cigarettes.

Without changes to the current legislation, smokers converting to heat-not-burn products could mean significantly less tax revenue for the government. Last year, taxes from cigarettes reached over 12.3 trillion won.
Once the legislation is passed, the higher tax levels could take effect as early as next month.

By Won Ho-jung (hjwon@heraldcorp.com)