Liquor

October 2002

The Ministry of Finance is planning raising taxes on tobacco and low-malt beer next fiscal year in the hope of securing extra revenues to fund planned tax cuts worth over 1 trillion yen aimed at reviving the economy. The ministry believes the proposed tax hikes for cigarettes and liquor would win public approval than levies for most other items. Finance Minister Shiokawa projects a net tax cut of 1.5 trillion yen for fiscal 2003, by slashing taxes to fund certain policy measures aimed at economic revival while raising other taxes by about 1 trillion yen. The ministry is already studying ending or reducing spousal deductions for the income tax or other deductions for dependents, but these measures will likely prove unpopular among taxpayers and therefore unfeasible. The ministry is now negotiating the proposed increase in the tobacco and low-malt beer taxes with other members of the government and the three ruling political parties. The proposed tobacco tax hike may be a good chance of being implemented, as it has the backing of Shiokawa and Hideyuki Aizawa, head of the ruling Liberal Democratic Party's tax panel. Consumers now pay about 7 yen in taxes per cigarette. A two-yen increase in the tax would add an extra 400 billion yen to the coffers of the central and local governments. Such a move would raise the cost of a pack of cigarettes by about 40. Demand for low-malt beer is growing because such brew is cheaper than regular beer. The ministry is considering raising the levy on low-malt beer closer to the tax imposed on regular beer. The tax on low-malt beer is about 37 yen per 350ml, just under half the tax on regular beer. The ministry will also study a plan to raise the tax for wine, which is lower than that for Japanese sake. (October 13, the Nihon Keizai Shimbun)