Liquors made in Korea to face lower taxes next year

Bottles of soju are on display at a supermarket in Seoul. [YONHAP]

The Korean government will lower taxes for domestically produced alcoholic beverages, such as soju, next year to reduce their prices.

The Ministry of Economy and Finance presented legislative proposals on implementing the standard sales ratio on domestically produced alcoholic beverages on Friday, effective Jan. 1. The proposals aim to narrow the price gap between Korean and imported liquors.

The government will reduce the tax base for liquors produced in Korea by subtracting sales expenditures and distribution fees from the base.

Critics have long pointed out the unfairness of the current tax system for alcoholic beverages. While domestically produced liquors are taxed based on the total production costs, sales expenses and management expenses, imported liquors are taxed solely on the import declaration price.

The introduction of the system mirrors a measure applied in July for automobiles to soften the imbalance in individual consumption taxes between domestically produced and imported vehicles in Korea.

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To determine the standard sales ratio, the Finance Ministry will consider factors such as production costs, distribution structures and the proportion of sales management expenses.

The final decision will involve deliberation by a committee within the National Tax Service.

"The move is expected to alleviate the perceived discrimination against domestically produced liquors, which have faced a higher tax burden compared to their imported counterparts," a ministry official said.

The government plans to enact the changes by the end of the year.

The National Tax Service is also expected to announce and implement the standard sales ratio within the year, beginning Jan. 1.

Despite the government's efforts, some industry insiders say that consumers may not feel a substantial change in liquor prices.

"Even with the introduction of the existing sales ratio system, it's difficult to anticipate a decrease in prices at places like restaurants and bars because the cost set by the owners carries substantial weight in pricing decisions," a liquor industry insider said Friday.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]