"Tax Reduced to One-Seventh, Meant for Medium and Large Companies"
Small Businesses 'Boiling' Over Tax Law Amendment
After the government recently proposed the ‘2024 Tax Law Amendment’ recognizing alcoholic beverages with added flavorings and colorants as ‘Takju,’ concerns were raised in the National Assembly that the law revision should be reconsidered. Small-scale brewery operators also criticized the amendment, saying it would lead to a decline in the quality of traditional liquors, including Takju.
On July 25, the Ministry of Economy and Finance held the Tax System Development Committee meeting and announced the ‘2024 Tax Law Amendment.’ The amendment includes easing the enforcement decree of the Liquor Tax Act to recognize alcoholic beverages with added flavorings and colorants as ‘Takju.’
Currently, the raw materials for making Takju are limited to △ ingredients containing starch △ nuruk (fermentation starter) △ water △ sugars △ fruits and vegetables △ additives such as aspartame. The amendment adds flavorings and colorants to this list. At present, if flavorings or colorants are added to Takju, it is classified as ‘other alcoholic beverages,’ and the name ‘Makgeolli’ or ‘Takju’ cannot be used domestically or for export.
If the amendment is implemented, taxes on Makgeolli with added flavorings and colorants will be significantly reduced. For example, for a bottle (750ml) of alcohol with a manufacturing cost of 1,000 won, the tax is 33 won if classified as ‘Takju’ under the Liquor Tax Act, but 246 won if classified as ‘other alcoholic beverages.’ According to the amendment, products previously classified as ‘other alcoholic beverages’ with added flavorings and colorants will be recognized as Takju and subject to the specific tax (tax based on volume), reducing the tax to about one-seventh of the current level.
The Ministry of Economy and Finance explained the purpose of the amendment, stating, “Expanding the allowable additives in Takju is a decision to support the development and production of products with diverse tastes and aromas.”
However, small-scale liquor companies are opposing the amendment, saying it could lower the quality of traditional liquors, including Takju. Lee Seung-hoon, CEO of Baekgom Uri Sul Research Institute, said about the amendment, “Even though the use of colorants and flavorings is currently prohibited, if they are added, the words Makgeolli or Takju cannot be explicitly used, but distribution in typical Makgeolli containers is possible,” and added, “The purpose of the amendment is solely to reduce the liquor tax burden for medium and large breweries.”
On the 3rd, Im Ho-seon, a member of the Democratic Party of Korea (Chungbuk Jeungpyeong, Jincheon, Eumseong), expressed concerns about the tax law amendment expanding the additives allowed in Takju during a Budget and Accounts Special Committee inquiry held at the National Assembly main building. Im pointed out to Deputy Prime Minister for Economy Choi Sang-mok, “If the amendment passes, it will not be the breweries using domestic agricultural products that receive liquor tax reductions, but only some companies manufacturing alcohol with added flavorings and colorants that will benefit from tax breaks,” adding, “This will cause significant damage to local specialty liquor and Takju producers using domestic agricultural products.”
In response, Deputy Prime Minister Choi said, “We accepted the industry’s request but confirmed that there are opposing opinions within the industry,” and added, “We will listen again to court precedents, related ministries such as the Ministry of Agriculture, Food and Rural Affairs, and industry opinions for further review.”
Kim Ji-hyun, Legal Times Reporter
※This article is based on content supplied by Law Times.
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