Photographer: Kiyoshi Ota/Bloomberg

The Tax Benefits of Big Tobacco's New Technology May Soon Flame Out

One of the selling points of high-tech cigarette alternatives -- in addition to the purported health benefits -- is they carry lower taxes than traditional smokes.

But in some places, that advantage may be going away.

Japan and South Korea -- two critical markets for emerging tobacco technologies -- are considering raising the taxes on Philip Morris International Inc.’s heat-not-burn products, according to Exane BNP Paribas. That would bring the levy in line with what the countries slap on regular cigarettes.

But even without a tax break, heat-not-burn products are a boon for business, Exane analyst Eamonn Ferry said in a report. Consumers will probably still be willing to pay more for the devices -- which heat up tobacco without setting it on fire -- as more smokers shun regular cigarettes.

“Heat-not-burn products could well demand a premium over time,” he said. “Health factors are typically 60 percent to 70 percent of the reason why smokers want to quit.”

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