39 Companies in South Korea Found Guilty of E-liquid Tax Evasion

According to a report by South Korean news outlet BreakNews on October 26th, Member of Parliament Kim Sun-mi of the National Assembly's Planning and Finance Committee has submitted records of false declarations of "stem and root nicotine in e-cigarette liquid". These records reveal that a total of 39 companies have been found to engage in deceptive practices by incorrectly declaring imported nicotine e-cigarette liquid as tax-exempt products in order to evade taxes.

These 39 companies collectively imported nearly 3 million liters of e-cigarette liquid, owing taxes amounting to 175.5 billion Korean won (approximately 950 million Chinese yuan). Of these companies, 19 have already ceased operations, making it increasingly difficult to collect the unpaid amount of 111.6 billion Korean won (around 600 million Chinese yuan). For instance, a company importing e-cigarette liquid located in the Jinjeong District of Busan City, had to pay a tobacco tax of 20.1 billion Korean won and a local education tax of 9.2 billion Korean won upon importing the liquid domestically. However, the company applied for closure without completing the import declaration and finalized the liquidation and registration of termination in April 2021.

The city of Busan later discovered the import situation through customs authorities and imposed 3.93 billion Korean won in value-added tax, among other charges. However, the company no longer had any fixed assets, deposits, or virtual assets. The company's owner could not be contacted, and the company's address was also unclear, making it nearly impossible to collect the unpaid tax. The National Audit Office exposed the issue of fraudulent declarations in November 2019. The Serious Crimes Investigation Unit of the Seoul Metropolitan Police Agency handed over six cases against nicotine importers and distributors to the Korea Customs Service, which only investigated two cases. Four cases were not investigated due to difficulty in determining intent.

Kim Sun-mi expressed that there are even suspicions that the closure of the 19 companies is related to certain associations and customs entities. It is evident that these planned closures, including closures after filing pre-tax appeals, are intentional acts, and the urgent task at hand is to immediately invoke prosecution rights to eradicate illegal businesses and ensure tax revenue.