The Ministry of Finance has estimated that a reduced tax rate for rice wine, expected to take effect as early as September, could cost the nation NT$1.47 billion (US$45.7 million) a year.
On Thursday, the Cabinet approved a draft amendment to the Tobacco and Liquor Tax Act (菸酒稅法) stipulating that red-label rice wine would be treated as cooking wine rather than distilled liquor.
If the bill passes its third legislative reading scheduled for Aug. 16, the tax rate for rice wine will be reduced to NT$5.4 per bottle, down from NT$29.25 per bottle, leading to a yearly tax loss of about NT$2.08 billion, the ministry said.
However, the new tax rate will cause prices to drop to NT$25 per 600ml bottle from NT$58 and boost sales to an estimated 210 million bottles per year, increasing tax revenue to NT$610 million per year.
“The government could see [an overall] tax loss of about NT$1.47 billion per year [after the new tax rate on rice wine takes effect],” said Lee Ching-hua (李慶華), deputy director-general of the ministry’s taxation agency.
After Taiwan joined the WTO in 2002, rice wine was subject to a distilled liquor tax of NT$185 per liter, causing the price of a standard bottle to rise from NT$22 to NT$180. Annual sales dropped, leading to rampant production of illegal, cheap rice wine, Lee said.
The legislature revised regulations last year to tax distilled liquor at NT$2.5 per liter for each percentage of alcohol by volume, boosting sales, but not stemming illegal production Lee said.
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