Allegations have been raised that 16 trillion won in taxes were evaded during the process of importing Chinese liquid e-cigarettes. The government countered that it is a rough estimate that is hard to verify because there are no official statistics, adding that it has strengthened customs screening and has been detecting false declarations of synthetic nicotine.
The Ministry of Economy and Finance issued this rebuttal on the 24th regarding claims raised in the National Assembly by Rep. Jeong Jin-uk of the Democratic Party of Korea.
Earlier, Jeong said that although liquid e-cigarettes imported from China were made with tax-liable "tobacco leaf-derived natural nicotine," companies falsified documents to label them as "synthetic nicotine" products to avoid taxation. He also said that about 300 million bottles based on 30 ml have been sold since 2016 after being declared as synthetic nicotine on import, and that applying the average tax of 54,000 won per bottle amounts to about 16 trillion to 20 trillion won in tax evasion.
In response, an Economy and Finance Ministry official said the basis for figures such as 300 million bottles cannot be confirmed and noted that until the revised Tobacco Business Act took effect in April, synthetic nicotine was in a blind spot for oversight, so it was incorporated as tobacco through the revision. Before incorporation, there were no official sales statistics, making verification difficult.
The ministry added that it has strengthened customs screening to detect false declarations. A ministry official said that since 2019, it has required six types of documents for imports of synthetic nicotine and mandated the entry of whether it is natural or synthetic and the nicotine content, thereby tightening customs screening. The official added that in Nov. 2022, the Korea Customs Service independently developed a component analysis method to distinguish natural and synthetic nicotine, enabling the detection of attempts to avoid the special consumption tax and other taxes.
According to the Korea Customs Service, cases detected for falsely declaring natural nicotine as synthetic were ▲10 cases (290 L) in 2022 ▲27 cases (163 L) in 2023 ▲5 cases (1.62 L) in 2024 ▲2 cases (0.02 L) last year.
Regarding Jeong's claim that manufacturing and exporting liquid e-cigarettes with synthetic nicotine is impossible under China's legal system, the official said that while production of synthetic nicotine solutions in China is strictly regulated, exports are not completely banned, and there are no special rules related to exports to Korea.
Jeong also pointed out that although the government brought synthetic nicotine products under the regulatory and taxation framework by revising the Tobacco Business Act, it missed a chance to prevent tax avoidance by not applying it retroactively to import volumes before the law took effect on Apr. 24.
In response, a ministry official said that during deliberations in the National Assembly, concerns over retroactive legislation led to a decision to apply the law only to products manufactured or imported after the effective date. However, the official added that to prevent long-term distribution of stock manufactured or imported before the effective date, the government established the Liquid E-cigarette Stock Product Safety Management Standards under the Framework Act on Consumers and has been enforcing them since Apr. 28.
The official added that the government plans to respond strictly to moves that circumvent regulations, such as sales of nicotine base and products claiming to be nicotine-free but containing nicotine. For inhalable nicotine-like substances, the Ministery of Food and Drug Safety will soon conduct a hazard assessment and, based on the results, the government will explore response measures.