Tobacco makers in South Korea are likely to face increased tax hikes on heat-not-burn cigarettes as legislators are to propose the bill.

Starting this week, the parliament will hold subcommittees to review the bill on raising other taxes on HNB sticks to up to 90 percent of taxes levied on conventional cigarettes, according to officials at health and home affair ministries.

The combined taxes are to be imposed on each 20-stick pack of HNB sticks will amount to 2,986 won ($2.74), from the previous 1,739 won, after the bill wins enough parliamentary votes. If tobacco makers decide to increase the retail prices to compensate, this would result in additional increases in value-added tax, according to industry watchers. 

Earlier this month, the National Assembly passed a bill to raise the individual consumption tax on HNB cigarettes with 230 votes in favor and one against.

The companies that produce HNB products are maintaining current prices for HNB sticks, but said they would raise the price if more taxes were levied.

Philip Morris International and British American Tobacco said they would discuss with their respective headquarters about raising consumer prices of HNB tobacco sticks if other taxes also increase. Korea‘s largest tobacco manufacturer KT&G said the company still has no plan for a price increase for its HNB tobacco sticks even if the bill passes the national Assembly.

Meanwhile, the government‘s tax revenue from HNB products is forecast to increase significantly.

The government has collected some 125 billion won in tax revenue from shipments of HNB cigarette sticks, which tallied 71.9 million packs during the period between April and October, according to the Finance Ministry‘s latest report.

By Shim Woo-hyun (ws@heraldcorp.com)