Spirit ruling scotches Japanese liquor tax

Date: 29/05/1997

By Mark Turner

JAPANESE whisky drinkers had cause for celebration last November when the WTO ruled that the country should cease discriminating against Scotch in favour of home-grown liquors.

In 1 October this year, Japan will bring down the tax on Scotch whisky by 44&percent;, with a further 26&percent; reduction promised in 1998. By 2001, all spirits in Japan will be taxed at virtually the same rate.

With one WTO victory under its belt, the EU is now fighting a similar battle over spirit taxes in Chile and South Korea.

But this is being made much more difficult, says Anthony Tucker of the Scotch Whisky Association, by the EU's internal fiscal discrimination.

Under Union rules, spirits must be taxed at a minimum rate of 550 ecu per hectolitre of pure alcohol (and 1000 ecu in some cases), whereas the legal rate on wine is nil. There is no maximum limit.

Big wine-producing member states such as France and Germany are consequently able to penalise whisky - which accounts for around half the Union's spirit production - in a directly competitive market.

Tucker argues that this undermines the Union's complaints. “When we took our case to the WTO, Japan was able to turn around and say - you protect against foreign produce, so why shouldn't we?”