Japanese Brewers Up In Arms Over Proposed Tax Hike

by Mary Swire, Tax-News.com, Hong Kong

29 November 2001

Japanese brewers and beer drinkers alike are up in arms over a planned tax attack on the nation's drinking habits. According to reports, the government is planning to increase taxes on the well-loved, low malt beer known in Japanese as 'happoshu', which is currently taxed at around half the rate of normal beer.

The government has reasoned that a tax increase will boost the slumping economy, and this may well be the case, as the Japanese are reportedly the world's fifth biggest beer drinkers, with happoshu sales accounting for around 30% of this.

However, major breweries such as Ashahi, Kirin, and Sapporo, and unlisted players like Suntory and Orion fear that bringing the tax on happoshu in line with ordinary beer could cripple demand for their most popular product, and have formed a pressure group to address the issue.

Opinion is divided as to whether, if the taxes are increased, consumers will stay loyal to the brew, with some (mainly beer drinkers) arguing that the taste is nothing special and that it has always been the price which has attracted customers, and others (mainly politicians) arguing that the taste is now on a par with ordinary beer, and therefore it should be taxed as such.

The Japanese tax authorities have announced that raising the tax on cheap beer could net them an extra 250 billion yen per year, in addition to the 1.8 trillion yen already garnered annually in alcohol taxes. However, even those with no vested interest in either the production or consumption of happoshu have questioned the wisdom of the proposed move. 'If we allow this kind of tax [increase] to get through at a time of economic downturn, the common sense of our nation's politicians will be called into question,' observed Kabun Muto a senior member of the LDP.

Ironically, the disgruntled brewers' strength may lie in Prime Minister Junichiro Koizumi's son, Kotaro, who has planted himself firmly opposite his father in this debate. Koizumi junior has been plugging Suntory's diet happoshu on Japanese television for some time.

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