Constitutional Court Upholds Tax on E-Cigarette Liquid Volume

The Constitutional Court has ruled that taxing e-cigarette liquid based on volume, regardless of nicotine content, does not violate the constitution.

On September 17, the court unanimously upheld the provisions of the previous excise tax law that set tax rates for e-cigarette liquid, following a constitutional complaint filed by companies such as Haka Korea, which import and sell e-cigarette liquids.

Previously, these companies argued that the nicotine used in their products was extracted from stems rather than tobacco leaves, claiming that their products should not be classified as tobacco under the Tobacco Business Act. This argument was based on the law prior to its amendment last year, which defined tobacco as products made from the leaves of the tobacco plant.

However, tax authorities determined that the imported products contained nicotine liquid extracted from tobacco leaves, classifying them as tobacco and imposing either an excise tax or a tobacco consumption tax.

The companies contended that it was unreasonable to impose taxes solely based on the volume of the liquid without considering nicotine concentration or content. They also argued that uniformly taxing products, even when they could not pass the tax onto consumers, infringed on their property rights, leading them to file a constitutional complaint after their request for a ruling on the constitutionality of the law was dismissed by the court.

The Constitutional Court recognized the validity of the current taxation method, siding with tax authorities. The court stated, "The volume of nicotine liquid can be objectively verified and measured," and deemed it a "rational choice to ensure efficiency in tax administration and legal stability."

The court further explained that applying tax standards corresponding to the final distribution and sales forms of each type of tobacco aligns with taxation principles and contributes to reducing harmful consumption through price increases, thereby promoting public health.

Additionally, the court noted that using subjective factors, such as whether the tax burden is passed on to consumers, as a basis for taxation could undermine the uniformity and predictability of tax assessments, emphasizing that it is the responsibility of importers to verify whether their products fall under taxable items and to report accurately.