South Korea has rejected claims of up to KRW20 trillion (US$14.6 billion) in unpaid tobacco taxes linked to Chinese synthetic nicotine imports as new rules bring synthetic nicotine products under tobacco regulations. Photo credit: Lindsay Fox, CC2.0.
South Korea's government has rejected claims that imports of Chinese synthetic nicotine e-liquids led to as much as KRW20 trillion (US$14.6 billion) in unpaid tobacco taxes, while acknowledging that products imported before the country's revised tobacco law took effect remain outside the current tax framework.
The dispute follows allegations by Democratic Party lawmaker Jung Jin-wook, who argued that KRW16 trillion-20 trillion (US$11.7 billion-14.6 billion) in tobacco taxes may have been avoided over the past decade. Jung contended that Chinese-made e-liquids declared as containing synthetic nicotine were actually made with tobacco-derived nicotine, allowing importers to avoid tobacco taxes.
Officials from the Ministry of Economy and Finance and the Korea Customs Service disputed that premise during a June 24 briefing. They said China tightly regulates synthetic nicotine production but does not prohibit exports of synthetic nicotine, meaning imports from China cannot automatically be treated as tobacco-derived nicotine products.
The government also questioned the methodology behind the estimate. Officials said the calculation assumed that roughly 300 million 30 mL bottles sold over the past 10 years all contained natural nicotine disguised as synthetic nicotine and should therefore have been subject to approximately KRW54,000 (US$39) in taxes per bottle. They said there is no evidence supporting that assumption.
Authorities acknowledged that some importers have falsely declared tobacco-derived nicotine as synthetic nicotine, but said the problem has been far smaller than suggested. Since strengthening customs procedures in 2019, importers have had to provide trade contracts, manufacturing process charts, manufacturing licenses, export declarations, material safety data sheets, and documentation identifying whether nicotine is natural or synthetic.
The Korea Customs Service also introduced its own analytical method in 2022 to distinguish between natural and synthetic nicotine. According to customs data, authorities detected 10 false declaration cases involving 290 liters in 2022, 27 cases involving 163 liters in 2023, five cases involving 1.62 liters in 2024, and two cases involving just 0.02 liters in 2025. Officials said the figures demonstrate that violations have occurred but do not support claims that all Chinese imports were misdeclared.
The debate comes as South Korea begins full enforcement of amendments to the Tobacco Business Act that expand the legal definition of tobacco to include all nicotine-containing products, regardless of whether the nicotine is natural or synthetic. The revised rules, which entered full effect on June 24 following a two-month transition period, subject synthetic nicotine products to the same taxes and regulations as conventional tobacco products.
However, products manufactured or imported before the law took effect remain outside the revised tax regime. Government officials said lawmakers intentionally avoided applying the legislation retroactively, leaving existing inventories effectively exempt from the new tobacco taxes.
At the same time, authorities pledged to strengthen enforcement against regulatory evasion. Inspectors will focus on raw nicotine liquid sales, products marketed as nicotine-free despite containing nicotine, and other practices designed to circumvent the revised law.