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Tax Gap of Heated Tobacco Products in the Republic of Korea

Heated tobacco products were introduced in South Korea in 2016 with the launch of IQOS (Philip Morris International). Since then, other available products include Glo (British American Tobacco) and Lil (KG&T). Through 2016, heated tobacco products were taxed according to the category of “pipe tobacco.” Amendments to local and national tax laws introduced a new category for “inhaling tobacco products using electronic devices,” effective January 1, 2017.

All tobacco products are subject to a specific excise tax system which consists of several federal and local excise taxes including:

  • The Tobacco Consumption Tax (담배소비세),
  • The Local Education Tax (지방교육세),
  • The Waste Contribution Tax (폐기물부담금),  
  • The National Health Promotion Charge (건강증진부담금),
  • The Individual Consumption Tax  (개별소비세).

For heated tobacco, the law includes a different tax system for heated tobacco products sold in sticks (e.g., PMIs’ “HEETS” and BAT’s “Neosticks”) and capsules or pods (e.g., JTI’s Mevius pods for Ploomtech). The tax for products sold in sticks has been based on the number of sticks, while that on HTP products sold in other formats has been based on the weight (grams) of tobacco.

As of 2020, the rates for cigarettes and heated tobacco are as follows:

 

Types of tax

Heated Tobacco

Cigarettes

Per 20 sticks

Per grams (capsules, pods)

Per 20 sticks

Tobacco Consumption Tax

897

88

1007

Local Education Tax

395

38.71

443

National Health Tax

750

73

841

Individual Consumption Tax

529

51

594

Waste Contribution Tax

25.02

25.02

25.02

Total

2596.2

275.9

2910.2


As of 2020, the total specific excise tax rate was KRW 2,596.2 per pack of 20 sticks of heated tobacco and KRW 275.9 per gram of heated tobacco in other forms. It was KRW 2,910.2 per 20 sticks of cigarettes. These rates have not changed since 2018 (with the exception of the Waste Contribution Tax, which increased from KRW 24.4 to KRW 25.02 in 2020), and are not scheduled to increase in 2021.

Sources

Last Updated Feb. 22, 2021