Japan: Liberal Democratic Party plans including beer-like drinks in the same tax category as beer

The Japanese Liberal Democratic Party's tax panel plans to cut the number of liquor tax categories to four from the current 10, putting beer-like alcoholic beverages in the same category as beer, LDP lawmakers said on December 9 according to Kyodo report.

The LDP Research Commission on the Tax System hopes the planned regrouping of liquor tax rates will help narrow tax-rate differences between alcoholic beverages, each of which carry different tax rates based on their raw materials and method of production. The plan is aimed at simplifying Japan's liquor tax structure and represents part of the ruling coalition's tax reform proposals for fiscal 2006, said the lawmakers specializing in tax affairs.

By taking advantage of these different liquor tax rates, brewers have released beer-like beverages at low prices. The tax rate of so-called third-category beer is 69 yen per liter, compared with 222 yen for beer.

Even though the LDP panel plans to put these alcohol products into the same category, tax rate differentials will remain for some time, according to the lawmakers. But the panel is considering applying higher tax rates on newly introduced third-category beer products as part of efforts to narrow tax rate differentials between alcohol products, they said.

Under the plan, the four categories are to be beer and beer-like beverages, alcoholic beverages made by fermentation, such as sake and wine, those made by distillation, such as shochu and whisky, and mixed alcohol products, such as liqueurs.

The LDP and its coalition partner, the New Komeito party, plans to unveil on December 15 their tax reform blueprints for fiscal 2006, which begins in April 2006.