Government to Push Forward Soju Tax Raise

Conflicts between the government and the ruling Uri Party are intensifying over the government’s taxation revision draft, which includes increasing the tax rate on soju and scrapping tax relief for small-to-medium-sized companies in the Seoul metropolitan area.

In a Cabinet meeting presided by President Roh Moo-hyun on September 20 at Cheong Wa Dae, the government voted to revise the liquor tax law which raises the liquor tax rate on distilled liquors, such as soju and whiskey, from the current 72 percent to 90 percent. Under the revision, the retail price of soju in restaurants will rise by about 1,000 won.

With regard to this, the ruling Uri Party also confirmed its stance to oppose a raise of the tax on soju that day.

Uri Party floor leader Chung Sye-kyun said in a meeting of high-level policymakers of the party that day, “We believe that it is not desirable to raise the tax on soju when the economy is not in good shape,” emphasizing, “The issue will be concluded according to the party’s idea.”

The ruling party recently reached an agreement to oppose an increase in the tax on soju and proposed three measures to make up for the shortage of tax revenue which the government rejected, saying, “They are no more than temporary measures.” The measures are a sale of stock owned by the government, sale of state-owned property, and adjustment of estimated expenditures.

In response, an Uri Party policymaker accused the government of “doing only what will contribute to a loss of votes.”

As the Grand National Party is also opposed to a soju tax increase, approving the government draft in this regular session of the National Assembly is expected to be difficult.

Meanwhile, Uri Party lawmakers on the Gyeonggi Province Development Committee issued a dissenting statement that day against the government’s revision of the law on limitation of tax exemption which scraps tax relief, including corporation tax and income tax, on small-and-medium-sized companies in the Seoul metropolitan area.

In-Jik Cho cij1999@donga.com