South Korea: Government Updates Beer Tax
The South Korean government has decided to tax beer based on volume and content as opposed to the cost.
The system change comes from the Ministry of Economy and Finance after about 50 years. Due to the previous taxation method, local brewers had complained they paid higher taxes than international producers of cheap foreign beers.
In the previous system local beers were taxed on the cost of production, the cost of sales and the profit margin, imported beers were taxed based on production costs and the customs duty.
The difference in taxation allows for aggressive promotions of some foreign beers, such as four-cans-for-10,000 won ($8.40) specials. The market share of imported lager hit 21.3% last year from just 4.4% in 2013.
Overhaul to the alcohol taxation system
The changes are part of a broader overhaul to the alcohol taxation system, which has been in force since 1968 and has faced criticism of being outdated.
Through the taxation change, beer products will be levied at a flat tax rate of 830.3 won per liter ($2.66 per gallon), the average tax rate for beer over the past two years. The changes will lead to increased tax on draft beers and beers sold in plastic and glass bottles, while decreasing the tax on canned beers.
The change according to the Ministry will help the local brewing industry. As the majority of local beer is draft beer a temporary two-year tax discount of 20% will be given for the product. The Ministry will submit a proposal of amendments to the National Assembly in September for review.
Alcohol policy in South Korea
©WHO Global Alcohol Status Report 2018
Alcohol harm is significant for South Korea. As reported by WHO, alcohol per capita consumption in the country is at 10.2 liters which is higher than in 2010 and comparatively above the average of the WHO Western Pacific Region.
- Binge alcohol use in youth between 15 to 19 years is staggering where 58.5% engage in heavy episodic alcohol use.
- Alcohol use disorders among men is at an alarming 21.2% and for both sexes 13.9, this is significantly over the average of the region.
- Alcohol dependence for both men and women is 5.5% which is also above the regional average.
- More than 5,000 cancer deaths are due to alcohol in South Korea every year.
The update to the South Korean alcohol tax system must therefore lead to higher alcohol prices given the pervasive harm. Furthermore, South Korea needs to further strengthen alcohol control policy to curb availability and regulate marketing more effectively. The country lacks a national action plan to tackle alcohol harm as the emergency that it is.
