In early December 2021, Japanese political parties compiled information on tax reform for fiscal 2022.
Abolition of the Okinawa liquor tax reduction included in the bill is currently bothering manufacturers in Okinawa.
Awamori tax news
In Okinawa prefecture, liquor tax has been reduced when you buy Awamori and beer produced in Okinawa prefecture. This is based on the Law Concerning Special Measures for the Reversion of Okinawa, which was enacted to mitigate environmental changes such as the influx of highly competitive products from outside Okinawa upon Okinawa’s return to Japan in 1972.
Thanks to that, tourists including myself had a very good experience drinking Okinawan beer and Awamori when they went to Okinawa.
On the other hand, from the viewpoint of fairness, the review of the tax cut system has been discussed several times. However, in the case of liquor tax, if the reduction system is abolished, awamori makers will have to pass on the increased tax to the price. The measure has been extended in the form of a change in tax rates due to opposition from awamori maker, who are concerned about consumers’ alienation from the price hike.
Currently, Awamori’s liquor tax is reduced by 35% due to the reduction measures.
For example, the liquor tax which normally costs 540 yen per 1800 ml is 351 yen in Okinawa prefecture. In the case of beer, it costs 70 yen per 350 ml if you buy it outside Okinawa prefecture, but if you buy it in Okinawa prefecture, it will be reduced by 20% to 56 yen.
If you see this, it may be considered a slight decrease. But, for example, I drink more than 120 liters of shochu a year.
At this time,
120000ml ÷ 1800ml = @67bottle
67 × @190yen = @12,670yen
There is a difference in the price depending on the yen tax.
You can buy 8 bottles of 1800 ml regular shochu.
People in Okinawa and Kyushu drink a lot of Awamori and Shochu, so the tax revision will give a big damage to their lives.
As a result, Okinawan alcoholic beverage makers have been able to lower their prices in stores because of the lower tax rate in Okinawa, and have a price advantage over similar alcoholic beverages produced outside the prefecture.
However, 2022 will mark exactly 50 years since Okinawa Prefecture returned to Japan. In response to calls from Japanese political parties for an end to 50 years of tax breaks, the Okinawa Awamori Association felt a sense of crisis and proposed ways to abolish the tax.
So the union proposed to abolish the reduction system by itself.
They called for the gradual abolition of the tax relief measures because it would have a big impact on liquor manufacturers. As a result, it was included in the tax reform bill.
What the union indicated was that the reduction range would be changed in 3 groups according to the shipment volume by 10years.
In 2 years, Group A 1300 will increase its annual shipment volume from the current 35% to 25%, and Group B will increase its annual shipment volume from 35% to 30%. The rate will be gradually lowered to 0% in 2032.
Small-scale awamori maker in Group C whose annual shipments are less than 200 kiloliters will continue to receive a 35% reduction until 2032, but will receive a 0% reduction in 2032 when the measure is abolished. In other words, the status quo will be maintained for 10 years, but after 10 years, there will be no reduction measures at once.
Picture from this website
One of the small breweries said it wants to sell its products on the main island of Okinawa, outside the prefecture and even overseas 10 years from now.
Therefore, we will narrow down the number of products, improve the efficiency of our work, and make time to focus on sales activities.
The company plans to raise the price in stages as it needs more money.
The company aims to follow the lead of major awamori makers, which are expected to raise their prices by lowering the rate of tax relief. The liquor tax rate for small businesses has remained the same for 10 years, so any increase in the price can be kept as profit. The plan is to use it for investment to expand sales channels.
But it’s going to be a bumpy ride. In the first place, the market for awamori, as well as beer and other alcoholic beverages, is shrinking due to a shift away from alcohol among young people and toward low-alcohol beverages.
Shipments of Awamori have declined for 16 consecutive years since 2004, and during the pandemic in 2020, shipments dropped to half of their peak.
According to the Okinawa awamori maker Association, shipments of Ryukyu Awamori decreased by 13.7% in 2020 compared to the previous year, and 30 out of 45 manufacturers of Awamori fell into the red in the same year.
80% of awamori is consumed in the Okinawa prefecture, and the decrease in tourists and the prefecture’s residents’ abandonment of awamori will be a big blow.
With regard to overseas expansion, the Cabinet Office and Okinawa Prefecture worked together to establish a project in 2018 to promote the overseas expansion of Awamori.
However, we have only just begun to expand overseas.
The percentage of Awamori sold overseas is currently less than 1%.
It is not easy to actively expand overseas, partly because of uncertainty about the end of the COVID-19 pandemic.
Although there are still 10 years before the liquor tax is revised, the country has been recovering from the damage caused by the pandemic for several years. How should we strengthen our management base and prepare for the abolition of the system in 10 years?
The alcohol industry, which has been a part of the Okinawa economy, is facing unprecedented challenges.
Hey now Okinawa Awamori market looks so bad but if you can understand the situation about them.
I hope you guys will enjoy Awamori.
But hope pls to go to Okinawa to enjoy or feel their culture so that your Awamori will beeeeeeeeeeeeeeee more delicious!!!
Glocal BAR Vibes / Nori