Japan’s Alcohol Promotion Is A Risky Tax Gamble


In Japan, young people are drinking much less than previous generations. This should be a good thing, right?

From a health perspective it is, but from a revenue perspective, not so much. It turns out that the teetotalism has caused a steep decline in the country’s liquor tax revenue, to the concern of Japan’s National Tax Agency (NTA).

In July 2022, the NTA devised a novel and controversial solution to this revenue problem: It launched a contest asking young Japanese citizens to submit their best ideas on how the government can boost alcohol consumption. Surprisingly, the agency received nearly 300 proposals from which it recently selected a winner.

The contest has attracted a lot of attention — some of it supportive, some of it incredulous — and it remains to be seen whether this experiment will be successful in the long term. In the short term, the entire exercise raises questions about whether it is ethical for a government to promote with one hand an unhealthy behavior that it targets with the other hand through sin taxation.


Japan isn’t facing a tax revenue crisis. In fact, its collections for fiscal 2021 hit a record high, largely thanks to increased consumption and corporate tax revenues. That said, the country is in the middle of a massive demographic shift that puts its tax base in danger. Japan has the oldest population in the world, and its population is also shrinking. Because of this, the government has been thinking long term about how it can buttress its tax system in the future.

The country’s liquor excise tax historically has been an important revenue maker, but revenue from the tax has fallen over the past 30 years, reaching a significant low in 2020. That year, Japan’s liquor excise tax revenue fell by over $800 million (¥110 billion) as a result of a perfect storm of COVID-19-related slowdowns, an aging population, and decreased interest in drinking among younger populations, according to The Japan Times.

Desperate Times Call for Creative Solutions

It’s important to give credit where credit is due, and the NTA is to be commended for its very creative approach to tax policymaking. Instead of simply hiking Japan’s liquor excise tax rates, the agency decided to give taxpayers some buy-in on how Japanese consumers can better patronize the country’s alcohol industry and, in the process, increase its excise tax collections.

The NTA opened the contest to people between the ages of 20 and 39 and asked them to think big. The agency said it would welcome creative proposals, such as ones that utilize artificial intelligence and the metaverse to boost sales, or proposals that incorporate lifestyle and taste changes brought about by the COVID-19 pandemic.

Two proposals came out on top. One called for the creation of a sustainable gin using local ingredients. The other suggested that food providers creatively incorporate a small amount of alcohol into a wide array of dishes.

What Is the Point of Sin Taxes?

Aside from being a novel idea, Japan’s contest raises questions about the purpose and expectation of sin taxes. Sin taxes are often advanced for the dual purposes of raising revenue and deterring unhealthy behavior.

Whether sin taxes actually reduce harmful behavior — and to what extent — is a question researchers are still exploring. But the point is that sin taxes generally are created to promote individual health. In Japan’s case, it appears that the government, in asking young Japanese citizens to buy more alcohol, is prioritizing the health of the country’s budget and its domestic alcohol industry over the health of its everyday citizens.

Could this approach work in the short term? Sure. But in the longer term, that approach could undermine trust in the government as a protector and promoter of healthy social behavior.

Articles You May Like

Ford is about to break out big EV losses for the first time
Buyers Are In The Game, But Interest Rates Are Keeping Sellers On The Bench
Are The Superrich More Burdened And Paying The Highest Tax Rates?
Traveling to Asia for work? This city is its most expensive business destination
Asia’s regulators say banking system is robust and stable after UBS-Credit Suisse takeover deal

Leave a Reply

Your email address will not be published. Required fields are marked *