South Korea is one of the countries with the highest quota of imported beers in the world. Last year 16.7% of all beers consumed inside the country came from abroad mainly because of an unequal taxation which favors imported beer. Now, the Korea Institute of Public Finance, a state-run think tank, has proposed a revision on liquor tax.
Up to now domestic beers are taxed on the sum of manufacturing costs, sales, marketing costs and profits. Imported beers are taxed on the import price. This creates a tax gap of up to 20% which even forces domestic companies like Oriental Breweries to produce at least part of their beers outside the country.
The new proposal sees beers taxed on volume rather than price and would lead to equal conditions for both, domestic and imported beers. However, consumer organizations fear a price hike especially on cheaper beers destined for the masses since a premium beer currently has to carry a higher tax.
The Korean government will decide upon accepting the proposal by the end of this month, but a reform is will most likely not become effective before the end of this year.