S. Korean gov't announces plans to reform liquor tax system

Arirang News 2019-06-05

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정부, 주세 50여년 만에 종량세로 개편…맥주•막걸리 먼저

New measures were announced today to revise South Korea’s liquor tax system... in an effort to boost private investment in the industry.
For consumers, the new tax system will mean lower prices of canned beer and craft beer, but higher prices for some others.
Our Ko Roon-hee tells us more.
Since 1968, taxes on alcoholic beverages in Korea were based on their prices.
This meant that companies making expensive beverages paid more tax, which caused firms to cut costs in many fields such as R&D.
But Korea's finance ministry has unveiled new plans to reform the alcohol tax system.
The new measures say taxes on beer and makgeolli will be based on volume or alcoholic content,.. instead of price.
The change will be limited to these two alcoholic beverages, for now, considering the rapid impact it could have on the liquor industry.
Finance chief Hong Nam-ki explained how this change will contribute to improving the nation's economy.
"These changes in the tax system will revitalize the craft beer industry...which has relatively big potential to create jobs. Also, if beer production increases in Korea, employment will boost in upstream and downstream industries. Facilities investment will increase as well."
The announcement comes after many beer companies criticized the current system for the unfair differences in taxes between domestic and foreign brands.
The government plans to include the changes in this year's tax reform proposal... and submit it to the National Assembly in early September.
If approved, the change is likely to take effect starting next year.
With the change,... tax on beer will come to around 70 cents per liter,... meaning consumers will be able to enjoy cheaper canned and craft beer from supermarkets or convenience stores.
An expert in the field pointed out that the reform should be applied to other beverages as well.
"Generally, liquor tax is considered adequate for improving the correcting effect of external diseconomy. External diseconomy refers to social costs incurred by drinking alcohol... such as damaging one's health or drunk driving. Therefore, the system of imposing taxes based on volume or alcoholic content should be applied to other types of beverages as well, like in many other OECD countries."
In another bid to revitalize the economy,... the government also announced Wednesday that it will extend a temporary tax cut on purchases of passenger cars until the end of the year.
This move is expected to revitalize the nation's auto industry.
Ko Roon-hee, Arirang News.

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