Will Draft Beer Prices Rise? Liquor Tax Discount to End This Year

[Anchor]

It is time for "Friendly Economy" on Wednesday with reporter Han Jiyeon. Han, is there a possibility that draft beer prices might go up?

[Reporter]

That is the prospect being raised as the draft beer tax discount, which has been in place for seven years, is set to end at the end of this year.

There is hardly any small yet certain happiness quite like heading to a pub after work and enjoying a cold glass of draft beer, especially in weather like this.

The government has been running a program that offers a 20 percent reduction on the liquor tax applied to draft beer.

Its official name is the "Temporary Reduction System for Draft Beer Liquor Tax Rates," and it applies only to draft beer stored in containers of 8 liters or more and served on tap.

This reduction has been decided not to be extended past December 31 of this year.

Currently, the tax is just under 710,000 won per kiloliter of draft beer, but starting next year, it will be subject to the same rate as regular beer, which is around 880,000 to 890,000 won.

Looking at the liquor tax alone, it increases by 177,200 won per kiloliter.

If you add education tax and value-added tax to this, you can expect an increase of about 130 won per 500cc glass, or about 5,000 won based on a 20-liter keg.

Why was this 20 percent discount introduced in the first place?

In 2020, the method of taxing beer changed, causing the tax burden to increase sharply only for draft beer.

Therefore, it was originally meant as a temporary two-year reduction, but it was extended twice through the COVID-19 pandemic, lasting seven years. This time, the government concluded that the purpose of the tax support has been achieved and included the termination of the discount in the tax revision plan.

This will be finalized once it passes the National Assembly.

[Anchor]

Prices really might go up a bit, then.

[Reporter]

Some people think that if taxes go up, draft beer served at restaurants and pubs will also go up. While it is not finalized, the industry expects a high possibility of an increase.

With raw material costs continuing to rise, compounded by growing burdens from labor and rental costs, an increase in taxes is very likely to be reflected in the final retail prices.

Furthermore, since restaurants usually adjust prices in neat increments of 500 won or 1,000 won, there are concerns that the actual hike felt by consumers could be larger than the tax increase itself.

On the other hand, the government believes that beer companies manage costs for canned, bottled, and draft beer together rather than selling draft beer separately, leaving some room for companies to absorb the tax burden on their own.

However, by this logic, companies that produce multiple products would always have to absorb tax increases, making that argument somewhat unconvincing.

[Anchor]

Lastly, is there going to be a closer review of how severely people are injured in traffic accidents from now on?

[Reporter]

It is aimed at cracking down on so-called "ip-won hwanja," or patients who prolong hospital stays unnecessarily for insurance claims.

If an accident occurs after September 10, next month, minor injury patients who receive treatment exceeding eight weeks will undergo a separate specialized review.

This is the so-called "eight-week rule." The targets are limited to relatively minor injuries ranked between grades 12 and 14 on the injury severity scale, such as simple sprains in the spine or limbs, or chest contusions.

Severely injured patients who require fractures to be treated or surgery are not subject to this from the beginning.

Pregnant women and infants aged 7 or younger can also continue receiving treatment without this review procedure.

Why was such a system created?

The number of minor injury patients actually decreased over a five-year period, but medical expenses over the same period surged by 41 percent.

Going from 1 trillion won to 1.41 trillion won.

Ultimately, all of this is reflected in our car insurance premiums.

In fact, the auto insurance loss ratio of the four major non-life insurance companies rose to 84.5 percent in the first half of this year, and the industry as a whole posted a deficit of about 189 billion won in the first half, returning to a deficit for the first time in six years.

Consequently, the Korea Insurance Development Institute estimated that if this system is well established, it could have the effect of lowering auto insurance premiums by about 3 percent.

However, there is also backlash.

In the traditional Korean medicine community, reactions are emerging that the degree of pain varies by patient, and cutting off treatment uniformly at eight weeks is unreasonable.

As for the procedure, once a medical certificate is submitted, the insurance company requests a review from the Korea Automobile Accident Compensation Welfare Association. The cost of issuing review documents and medical expenses until the review is completed are borne by insurance companies or mutual aid associations, not the patients.

If there is an objection, a re-examination by specialized medical personnel can also be received.

A new computer system is also being built for prompt reviews.

About 200 medical specialists with over 10 years of experience are being appointed as review committee members.

The plan is to inspect the system quarterly even after implementation and fine-tune the criteria.
※ Please note: This article was translated by AI and may contain errors.