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[Asia Economy Reporter Lee Seon-ae] The tobacco industry is raising voices that it is inappropriate to impose excessive taxes on heated tobacco products, which are fundamentally different from conventional cigarettes. Scientific evidence shows that heated tobacco products are less harmful, and research results also indicate that considering the external costs of smoking, the appropriate tax amount for electronic cigarettes should be lower than that for conventional cigarettes.

According to a report titled "A Study on Estimating the External Costs of Smoking and Rational Tobacco Taxation Measures" recently published by Hansung University Global Economic Research Institute on the 25th, when estimating the external costs of smoking under the assumption that the harmfulness of all tobacco products is the same, the appropriate tax amount for heated tobacco products should be about 20% lower than the current level. The study classified the social external costs of conventional cigarettes and heated tobacco products into medical and labor loss costs, fire costs, and discomfort costs, and estimated each cost.

Professor Park Young-beom of the Department of Economics at Hansung University explained, "The government's stance on tobacco taxation systems has so far assumed that conventional cigarettes and heated tobacco products are 'the same tobacco,' but this study found that the social costs caused by smoking conventional cigarettes were higher than those of electronic cigarettes."

In the past, the tax on heated tobacco products was only about half that of conventional cigarettes. As heated tobacco products rapidly expanded their market share by emphasizing their lower harmfulness compared to conventional cigarettes, the government raised the tax to 90% of the level of conventional cigarettes based on the harmfulness research results from the Ministry of Food and Drug Safety. Eventually, Korea Philip Morris filed a lawsuit questioning the reliability of the Ministry's research results. In May, the Seoul Administrative Court ordered the Ministry of Food and Drug Safety to disclose the analysis data. However, the Ministry's failure to comply has intensified the controversy. Furthermore, Philip Morris received the first marketing authorization for a "modified risk tobacco product" for heated tobacco products from the U.S. Food and Drug Administration (FDA), citing lower emissions of harmful substances compared to conventional cigarettes.

Based on this evidence, the Hansung University Global Economic Research Institute argues that the differential taxation of heated tobacco products, which is implemented in various countries around the world, should also be applied domestically. The tax burden ratio of heated tobacco products compared to conventional cigarettes in Korea is 90.4% (conventional cigarettes : heated tobacco products = 1 : 0.90), the highest among major countries. Professor Park emphasized, "Looking at the cases of major advanced countries, tobacco regulations and tax rates proportional to the harmfulness of each tobacco product type are applied," and added, "The government should consider introducing tobacco regulation policies proportional to tobacco harmfulness, such as strengthening regulations on more harmful tobacco and relaxing regulations on less harmful tobacco."

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