"Will Draft Beer Prices at After-Work Pubs Rise?... 20% Tax Reduction Benefit to End"

Possible End to Draft Beer Tax Benefits After Seven Years
Unavoidable Burden on Dining Prices and Small Business Management
Price Per 500ml Glass Could Rise by Up to 1,000 Won

Starting next year, restaurants and bars in Korea are expected to face higher tax burdens on draft beer sales. This comes as the 20% tax reduction benefit for draft beer, which has been in effect since 2020, is set to expire at the end of this year. With taxes on each glass of draft beer projected to rise by at least 130 won, attention is now turning to whether this will result in higher consumer prices across the food and beverage industry.

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According to the "2026 Tax Reform Plan" announced by the Ministry of Economy and Finance on August 16, the government has decided not to extend the temporary tax reduction policy for draft beer, which is set to end on December 31 of this year.

The draft beer tax reduction scheme was first introduced in 2020, when the beer tax system switched from an ad valorem tax based on price to a specific tax based on shipment volume. At the time, the tax rate was lowered by 20% as a temporary measure to ease concerns about a sudden surge in the shipment price of draft beer stemming from the tax system revision.

The government said that "the purpose of introducing the system has been sufficiently achieved," explaining its decision to end the tax benefit. If the latest tax reform plan passes the National Assembly, the tax rate on draft beer will increase from the current 80% to 100%.

Tax Increase of 127 Won Per Glass... Greater Burden on Small Business Owners and Consumers

Up to now, under the Liquor Tax Act, draft beer in containers of 8L or more infused through separate dispensing equipment has been subject to a tax rate of 80% of that applied to regular beer. The liquor tax on regular beer is 885,700 won per kiloliter, while draft beer, benefitting from the reduction, has been taxed 708,500 won per kiloliter.

With the expiration of the reduction at year-end, from next year onward, draft beer will be taxed at the same rate as regular beer. As a result, the liquor tax alone will rise by 177,200 won per kiloliter.

When factoring in the education tax and value-added tax (VAT), which are linked to the liquor tax, the actual tax burden at the shipment stage will increase by over 200,000 won per kiloliter. This means that one 20-liter keg of draft beer will be subject to about 5,000 won in additional taxes. For a 500ml glass, the extra tax burden will amount to roughly 127 won.

However, the entire tax increase does not necessarily translate directly into higher consumer prices. The actual price rise could vary depending on whether liquor manufacturers absorb part of the cost, the margin structures at the wholesale and distribution stages, and the individual pricing strategies of establishments.

Industry insiders point out, "With fixed costs such as raw material prices, labor, and rent already rising and intensifying the challenges for small business operators, the added tax burden will inevitably force bars and restaurants to raise draft beer prices by about 500 to 1,000 won per glass."

Legislative Proposal for Permanent Reduction Introduced in the National Assembly... Lawmaking Uncertainty Remains

Nevertheless, there is still a possibility that the expanded tax burden could be reversed through legislative debate in the National Assembly.

On August 7, Assemblywoman Kim Eun-hye of the People Power Party sponsored a "partial amendment bill to the Liquor Tax Act" that would remove the sunset provision for the 20% draft beer tax benefit, thereby keeping the lower rate in place indefinitely. The intent is to eliminate the currently set expiration date of December 31, 2026, and maintain the 20% tax reduction on draft beer.

As a result, whether the tax on draft beer will increase will be finally determined during the regular National Assembly's budget and tax review later this year. If the government proposal passes as is, price adjustments by manufacturers and distributors will become unavoidable. Conversely, if the National Assembly makes the reduction permanent through legislation, the current tax rates will be maintained.

This content was produced with the assistance of AI translation services.