A revision of the Tobacco Business Act, which stipulates and regulates liquid electronic cigarettes made from synthetic nicotine as "tobacco," is expected to be addressed in the National Assembly. However, to assist small business owners selling synthetic nicotine electronic cigarettes with restructuring their operations, it is being seriously considered to delay the sales distance limit regulation for two years. Additionally, it seems that the tobacco tax imposed on tobacco will be reduced by 50% for the next two years to ease the burden on small business operators.
According to the National Assembly and the Ministry of Strategy and Finance, the National Assembly's Planning and Finance Committee will hold a meeting on the 18th to discuss the handling of the revision of the Tobacco Business Act. If the bill passes the subcommittee on that day, it is highly likely that the revision will be processed in the plenary session later this month.
Currently, there are 10 pending amendments to the Tobacco Business Act that expand the definition of tobacco materials from "tobacco leaves" to include "tobacco and nicotine."
Under current law, synthetic nicotine is not considered "tobacco," and thus, tobacco taxes and fees are not imposed. Regulations regarding warning labels, advertising restrictions, and online sales restrictions also do not apply. Selling to minors is not punishable. As a result, there have even been instances where retailers or vending machines selling synthetic nicotine electronic cigarettes have set up in front of school entrances.
On the 10th, both ruling and opposition parties discussed the revision of the Tobacco Business Act in the Economic and Finance Subcommittee, but did not reach a vote. Some lawmakers indicated that care should be taken in introducing regulations considering the opposition from the liquid tobacco industry and the difficulties faced by small businesses. At that time, the subcommittee concluded by instructing the Ministry of Strategy and Finance to gather data on the sales status of synthetic nicotine and the market impact of the amendment before reporting back.
According to the "References" on the Tobacco Business Act related to synthetic nicotine secured by ChosunBiz, the Ministry of Strategy and Finance noted that "it is necessary to implement taxation alongside business regulations" regarding the taxation of synthetic nicotine electronic cigarettes, insisting that "in considering tax equity, it is essential to apply the same tax rate as liquid natural nicotine electronic cigarettes in principle."
It added, "If necessary for easing the burden on small business operators due to taxation, it is possible to consider some reductions (50% for two years) during the initial stage of taxation."
Currently, a pack of regular cigarettes (20 pieces) incurs a total of 3,323 won in tax burden. The Ministry of Strategy and Finance plans to impose a similar amount of 3,275 won (equivalent to 1.6 mL for 20 regular cigarettes) as a tax burden on synthetic nicotine electronic cigarettes.
However, during the initial two years of taxation, it reported to the National Assembly that it would receive only about 1,800 won to ease the industry's burden.
Regarding the overlapping issue of tobacco sales rights (distance restrictions) that arise as small businesses enter the regulated market for synthetic nicotine, it is primarily under consideration to set a two-year grace period to encourage voluntary restructuring among synthetic nicotine liquid electronic cigarette retailers.
By considering the guidance period and store leasing period, it is proposed to provide a grace period of about two years to encourage voluntary business restructuring.
However, regarding this regulatory grace period, organizations like the Electronic Cigarette Association have expressed opposition, stating that it is "a special measure for some synthetic nicotine companies."
The Ministry of Strategy and Finance's position is that sales through unmanned vending machines and online sales should be fundamentally prohibited.
Meanwhile, it is reported that local governments have requested the Ministry of Strategy and Finance to create a provision that allows them to investigate and punish the illegal activities of retailers. They argue that it should be possible to revoke the designation of retailers by authority for stores that are judged to have engaged in illegal activities through administrative investigations.
A Ministry of Strategy and Finance official said, "The government's consistent stance is that it is correct to regulate synthetic nicotine electronic cigarettes just like regular cigarettes for the enhancement of public health rights," adding that "while regulations may be deferred considering the guidance period, the issue of reverse discrimination against regular tobacco sellers may arise. The final discussions will be reviewed and determined in the subcommittee."