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| Report of the OTO Advisory Council (April 12, 1993) |
1. Complainant: Keidanren
2. Ministry concerned: Ministry of Finance
3. Complaint:
(1) Regarding the liquor tax on liquor produced in Japan, when liquor was moved from its place of manufacture in a specific month the law currently requires that a tax declarations be filed by the end of the next month, and that the liquor tax be paid by the end of the second following month. In the case of imported liquor, a liquor tax declaration must be filed, and the tax paid, at the time of import, together with the import declaration and the declaration and payment of tariff. The complainant states that while the liquor tax on domestic liquor is due two month after the liquor has been moved, the liquor tax on imported liquor must be paid immediately on import and that this lack of a payment extension constitutes discrimination between domestic and foreign products. The complainant believes that payment of the liquor tax on imported liquor should also be allowed to be made on a monthly basis.
(2) When domestic liquor is returned to its place of manufacture or re-shipped from another place of manufacture, an exemption is granted for the initial tax imposed on the liquor to avoid double taxation. But in the case of imported liquor, a tax refund is made only if the liquor is in breach of contract and is placed in bond within six months of the date of the import license for purposes of re-exportation or disposal, or if it is re-exported in its original condition within one year. The complainant states that when liquor must be disposed of because of damage or other reasons beyond its control, the liquor tax is refunded if domestic liquor is returned to its place of manufacture, but there is no provision for a tax refund for imported liquor. According to the complainant, this constitutes discrimination between domestic and foreign products and a tax refund should be granted for imported liquor if it is returned to its prior untaxed status, for example, by being placed in bond.
4. Results of deliberation:
(1) It is not unreasonable for importers to consider that the current requirement that the liquor tax be paid at the time of import generates extra paperwork, compared to the system of reporting and paying the liquor tax due over a specific period for domestic transactions.
But where imported liquor is concerned, it is usually the case that many entities are liable to taxation, and since they may not necessarily import liquor on continuing basis, assessing the liquor tax due as part of overall import procedures and collecting this together with tariff is a practical method for ensuring reliable and efficient tax collection. Other indirect taxes are also assessed and collected at the time of import, and considering that this method of collecting indirect taxes is used by other countries as well, it is inappropriate to change the system to allow reporting and payment of total liquor tax on imports of liquor over a specific period because of the various problems involved.
(2) Concerning the handling of taxes on imported liquor which must be disposed of because of damage, responsibility for the integrity of the product at the distribution stage lies with the liquor broker or seller. The government cannot be expected to deal with eventualities occurring during distribution, although special situations could arise if a disaster is involved. The complainant states that a tax refund should be made to eliminate discrimination between domestic and imported products, but the provision for tax refunds for domestic liquor is in place to avoid double taxation in the event that liquor returned to the manufacturing plant is re-used as an ingredient and re-shipped as liquor. This provision is not intended to refund the liquor tax on liquor disposed of at the manufacturing plant. Given these circumstances, various factors make it inappropriate to refund the liquor tax on imported liquor disposed of because of problems occurred at the distribution stage.