Japan: Liquor tax revenue plunges by more than 110 bln yen in fiscal 2020

Weighed down by the COVID-19 pandemic, Japan's liquor tax revenue in fiscal 2020 plunged by more than ¥110 billion from the previous year to ¥1.13 trillion, according to National Tax Agency data published this year.

Both the size of the fall and the rate of decrease were the largest in 31 years since the impact of a drastic revision of the Liquor Tax Law in fiscal 1989.

The spread of the coronavirus is believed to have dealt a direct blow to tax revenue as customer traffic plummeted at restaurants offering alcoholic beverages.

The agency's division believed that alcoholic drinks would not be strongly affected by economic conditions and would remain a stable tax revenue source with little fluctuation. The liquor tax revenue share of total government tax revenue has shrunk, however, standing at 1.7% in fiscal 2020, compared with 5% in fiscal 1980.

"As working from home made strides to a certain extent during the COVID-19 crisis, many people may have come to question whether they need to continue the habit of drinking with colleagues to deepen communication," an official at the agency said. "If the 'new normal' takes root, that will be an additional headwind for tax revenue."

The year-on-year fall in fiscal 2020 liquor tax revenue, at 9.1%, came after many restaurants voluntarily shut down or shortened business hours in line with requests from authorities amid concerns that conversations at drinking establishments would help spread coronavirus infections. Outdoor events were also canceled one after another.

All of these developments contributed to a slump in the consumption of alcoholic beverages.

Beer consumption suffered a particularly steep drop, which accounted for the largest share — about one-third — of liquor tax revenue in fiscal 2020, which ended in March 2021, with sales volume shrinking 20.1% to 1,794,000 kiloliters.

According to Kirin Brewery Co., per capita beer consumption in Japan totaled about 55 bottles in 2020, down 9.1% year on year.

As of December 2021, liquor tax stood at ¥70 for beer, about ¥47 for happoshu, low-malt beer-like beverages, and ¥37.8 for so-called third-segment quasi-beer products per 350 milliliters. An official at the agency's Liquor Tax and Industry Division said that "many people probably drank at home rather than at izakaya and chose happoshu or third-category beer, which have lower tax rates."

In fiscal 2021, liquor tax revenue was expected to rebound 3.7% to ¥1.18 trillion on a state budget basis. It is clearly on a long-term downtrend, however. Since reaching ¥2.2 trillion in fiscal 1988 during the speculation-driven bubble economy period, revenue has fallen gradually. Declining consumption of alcoholic beverages by young people, the graying of the population and lifestyle changes are among reasons cited for the decline.

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