Japan: The government plans to hike the tax on quasi-beer drinks

The Japanese Finance Minister announced the government plans to overhaul the liquor tax system in fiscal 2006 and raise the tax rate on "third-segment" beer-like alcoholic beverages, Jiji Press Tokyo posted on October 18.

At a press conference Tuesday, October 18, Finance Minister Sadakazu Tanigaki predicted that the Tax Commission, a government panel, will discuss simplifying taxation categories for alcoholic beverages.

The government presently sets 10 different tax rates on a variety of alcoholic beverages based on materials and production processes. The ministry intends to consolidate them into around four categories, such as fermented liquor and distilled one, informed sources said.

The ministry is studying a plan to integrate regular beer, "happoshu" low-malt quasi-beer products and the third-segment beer- like drinks into a single category. It plans to narrow the difference of tax rates among them by lowering the rate on regular beer while raising the rate on the third-segment products, according to the sources.

The ministry's planned liquor tax reform is not intended to increase tax revenue, a Tax Bureau official said.

The third-segment beer-like drinks contain little or no malt. Sapporo Breweries Ltd.'s Draft One contains a pea protein. Kirin Brewery Co.'s "Nodogoshi" and Asahi Breweries Ltd.'s "Shinnama" are made from soybean ingredients.

These products have sold well thanks to low tax rates and retail prices. The Tax Bureau official said that setting too many taxation categories led brewers to develop third-segment beverages.

But the brewers oppose any tax hike on the third-segment beverages, arguing that they are new drinks born out of their innovative efforts and, therefore, should be treated separately from conventional beer.

The Tax Commission will compile its tax reform proposal for fiscal 2006, starting next April, in November or early December. But whether to raise the tax rate on the third-segment products will be left for the ruling coalition's tax panel to decide later this year.

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