Japanese Sake Talk #33 Okinawa Awamori’s 50-year tax reduction, will gradually enter the history

49 years ago, when Okinawa returned to Japan, the income of the prefectural residents was much lower than that of other local prefectures. In order to avoid damage to the weak Okinawa economy, tax concessions were given, and the measures to reduce the alcohol tax were also one of them. Although the content of the measures to reduce or exempt alcohol tax has been adjusted with the changing times, it has been repeatedly extended 11 times so far. It is reported that the government and the ruling party have decided to gradually reduce the relief from next year, the 50th anniversary of the handover, until it is finally abolished.

What is the current liquor tax for various liquors?

Awamori is a single-type steamed shochu, and the alcohol concentration of common products on the market is 30%. Therefore, under the capacity of 1800ml, if there is such a wine produced in the country, the wine tax is (30÷25)*450=540.

How big is the gap made by the alcohol tax relief?

For example, awamori pays 35% less tax than shochu made/sold in Japan. Specifically, for Awamori that sells a one-liter bottle, the domestic liquor tax is 540 yen, but in Okinawa it is 351 yen, which is 55% off, which is 189 yen cheaper. If it is a 350ml canned beer, the domestic price is 70 yen, and Okinawa only needs to pay 56 yen for 20% off, which is 14 yen cheaper. In the first year of Reiwa, Okinawa's liquor tax was reduced by 2.62 billion yen, which means that those who manufacture and sell awamori or beer in Okinawa do not have to pay 2.6 billion yen in tax.

What could be the steps to repeal the liquor tax break?

The Awamori part: It will be divided into three groups according to the number of manufacturers' shipments. The top two groups with the largest shipments will be in Reiwa 6 (2024), Reiwa 8 (2026), and Reiwa 11 (2029) The 35% tax rate differential will be gradually narrowed in three stages, and will be completely abolished from May 15, 2014 (2032). The group with the least shipments will maintain the current 35% tax cut until it is fully abolished from May 15, 2014.

Part of beer: Reiwa 5 (2023) began to change from 20% to 15%, and then abolished the tax reduction in Reiwa 8 (2026) when the tax rate for sparkling sake and third-class beer became a single tax rate.

There is only one brewery in Okinawa Prefecture, Orion Beer. At that time, it was bought by the largest securities company in Japan and an investment fund in the United States in 2019. What makes people feel that it is controversial and unfair is that Orion cannot be regarded as Okinawa Prefecture. It's really unfair for companies to enjoy preferential tax treatment, right?

The impact of shrinking/repeating tax cuts?

In the first year of Reiwa, 30 of the 45 Awamori breweries suffered financial losses due to the reduced tax payment, and there were not only a few breweries facing a business crisis. To put it bluntly, the difference in alcohol tax has to be passed on to consumers to absorb.

On the other hand, the sake brewing group began to promote different regular activities, strive to expand the drinking group of awamori, and prepare for the full payment of the liquor tax in ten years as soon as possible. There are also like-minded brewers working together to launch more modern wines, or single brewers launching new products (Awamori and non-Awamori) to diversify their product portfolio.

The future of Okinawa's alcoholic beverages is still uncertain.