ⅤProper Management ofLiquor Administration〜 Taking various measures to secure liquor tax revenues and lead to thedevelopment of liquor industry successfully 〜
About the NTA

Since Meiji era (1868~1912), liquor tax revenues had been a major national income along with land tax
revenues and been the top rated income, namely, exceeding land tax revenues at one time. Thereafter, there
has been an increase in the relative weight of income tax, corporation tax and consumption tax, etc., andin FY2016, liquor tax revenues comprised 2.2% of all tax revenues. Liquor tax is not affected much by theeconomy, which provides stable tax revenues, and in FY 2016, liquor tax revenues was ¥1,319.5 billion. Itfulfills an important role for national tax revenue even today1. Compared with food items, a high tax rate isimposed on liquor. For securing liquor tax revenues appropriately and smoothly shifting the tax burden onto
customers, there is a liquor licensing system for manufactures and sellers.
The environment faced by the liquor industry has been changing considerably, such as decreasing domestic
consumers due to a declining birthrate and increased aging population, rising health and safety consciousness
among the public, and diversifying lifestyles. As the authority for the liquor industry, the NTA has been making
efforts with the private sector to promote the development of Japanese liquor in order to achieve a sounddevelopment of the liquor industry in consideration of the environmental changes mentioned above. We havealso been taking various measures from a comprehensive perspective, considering consumers and the overallliquor industry.

Efforts to Enhance Services
for Taxpayers and to Boost
Efficiency of Tax Administration

Proper and Fair
Taxation and Collection⑴ Measures for promoting the development of liquor made in Japan

Remedy for
Taxpayer Rights

Although the volume of consumption (taxablevolume) of overall liquors is on a decline, the export■ Trend in the export amount of liquoramount of Japanese liquor has been on the rise（￥million）
in recent years due to an overseas Japanese food54,50355,000boom and other factors, and reached approximately
50,00054.5 billion yen in 2017, marking a record-high for
45,000
6 consecutive years. Taking a look at export value
42,99639,029by category, sake comprises the largest amount,40,000
with 18.7 billion yen (119.9% vs. previous year),
35,000boasting the 8th consecutive year of record setting
29,351
30,000volume, with export volume reaching approximately
25,09725,00023,482KL (119.0% vs. previous year). This is20,66019,033followed by whiskey, with approximately 13.6 billion
20,00017,857
16,771
15,72015,399yen, and beer, with approximately 12.9 billion yen.
15,000
Whiskey, in particular, has demonstrated significant
10,000increase, growing by 11.3 times, from approximately
5,000
1.2 billion yen, 10 years ago (2007).
Examining exports by country (region), at the top0
ʼ07 ʼ08 ʼ09 ʼ10 ʼ11 ʼ12 ʼ13 ʼ14 ʼ15 ʼ16 ʼ17of the list is the United States, with approximately（year）
12 billion yen, Republic of Korea coming in at 2nd,
(Source: “Foreign Trade Statistics” by the Ministry of Finance)with approximately 10.8 billion yen, and Taiwan in
3rd position, with approximately 5.3 billion yen.
In terms of promotion of export of Japanese liquor, the NTA is engaged in the following initiatives with thepublic and private sectors, in cooperation with the promotion of “Cool Japan”, which is an initiative of theoverall government.

Proper Management ofLiquor Administration
Proper Administration ofServices by Certified Public
Tax Accountants (CPTAs)

Evaluation ofPolicies
Statistics

1 As part of the FY2017 tax reform, the liquor tax rate structure was revised, including the integration of tax rates for beer and malt beverages, and the definition of beer,etc. was also revised.

National Tax Agency Report 201856

Ⅴ Proper Management of Liquor Administration
The NTA has been endeavoring to make Japanese liquor widely well-known overseas through the promotion ofJapanese liquor by means of sending NTA officials to international conferences and events (e.g., the Rio Olympics andParalympics) and gaining cooperation from relevant organizations.
In cooperation with related government offices, the NTA is requesting for tariff elimination, resolution of non-tariff barriers
and protection of Geographical Indication for Japanese liquor, at opportunities at the seat of various international
negotiations.1
The NTA is engaged in supporting the development of foreign specialists in Nihonshu (Japanese sake), with theobjective to develop correct knowledge concerning Japanese liquor.
The NTA is promoting dissemination and awareness of the attractiveness of liquor made in Japan, e.g., to conduct tours
at sake brewery for foreign ambassadors in Japan in cooperation with the liquor industry.
The NTA is striving for proper management of the Export Alcohol Market System, which was enacted on October 1,
2017, while aiming to promote and enhance recognition for proliferation and expansion of the system in cooperation
with related government offices and associations.

In addition, the NTA establishes labeling standards for liquors such as wine and sake with the perspective topromote the use of the Geographical Indication, which is effective in enhancing brand value of Japanese liquor,and to assist consumers’ choice of merchandises.
Moreover, the NTA is organizing a variety of seminars conducted by business-guidance experts, providing
information with regard to the actual cases of revitalization and management innovation attempted by liquor
business operators and to the measures for small- and medium-sized companies. NTA also examines andanalyzes the trends in liquor industry by conducting various surveys on manufacturers and distributors,followed by providing these results on the NTA website.

■ Changes in taxable volume■ Beer■ Sake■ Continuous distillation Japanese spirits (Shochu) and Single system distillation Japanese spirit (Shochu)■ Whiskey and brandy（thousand kl）■ Liqueurs

9,792 10,166

10,000

8,000

9,549

■ Fruit wine and sweet fruit wine

9,362

■ Sparkling liquor■ Other brewed liquors

9,266

9,093

9,001

8,963

8,936

8,863

9,040

2007

2008

2009

2010

2011

2012

2013

■ Other

8,698

8,836

8,773

2014

20152016

7,464
6,250

6,000

5,068

4,000

2,0000

1970

1975

1985

1993

1999

2005

2006

（fiscal year）(Source: National Tax Agency Annual Statistics Report)＊ Taxable volume indicates the volume of liquor shipped from a factory or imported on which a liquor tax was imposed.

1 After the accident at Fukushima No. 1 Nuclear Power Plant caused by the Great East Japan Earthquake, some export destinations introduced import restrictions. TheNTA has been urging these countries to lift or to mitigate the restrictions in cooperation with the Ministry of Foreign Affairs and the National Research Institute of Brewing.
As the result, restrictions on Japanese liquors have been lifted or mitigated in the EU, Brazil, Malaysia, Russia, Thailand, Egypt, French Polynesia, Dubai and Abu Dhabi.

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National Tax Agency Report 2018

◎ Result of the EPA negotiation between Japan and EU

Efforts to Enhance Services
for Taxpayers and to Boost
Efficiency of Tax Administration

Proper and Fair
Taxation and Collection

Labeling Rules for Wines

Column 61

About the NTA

Through the EPA negotiation between Japan and EU, which resulted in a settlement with EU in December 2017,
the following achievements, which will contribute to promotion of Japanese liquor and the export of these products,
were achieved in the EU side: ① Tariff elimination for all liquors, ② Protection GI for Japanese liquor, including the GI“Nihonshu”(Japanese sake), ③ Removal or relaxation of import restrictions on “Japan wine” (fruit wine manufactured
exclusively within Japan and from grapes harvested in Japan), and container and capacity constraint on single system
distillation Japanese spirit (shochu).
As a result, while only wines which complied with the EU’s regulation regarding to winemaking, with the attachmentof certificate that certifies the conformity with such regulation and is issued by the competent authority, could havebeen imported into the EU region, now, after the Agreement is entry into force, most of Japan wines originally
manufactured for domestic consumption without the conformity with EU regulation, may be exported with only aself-certification, leading to significant reduction in monetary and resource burdens. Moreover, before, single system
distillation Japanese spirit (shochu) could be distributed and sold only in the designated volumes, such as 700ml and1,750ml, but after the Agreement is entry into force, the product in 720ml (yongo-bin) bottles and 1.8 liter (issho-bin)bottles can be exported.

Wine Market Trends and Background of Enactment of the Labeling Rule

Remedy for
Taxpayer Rights

As taxable volume of overall liquors is on a decline, taxable volume of fruit wines is on an increase. There is also anincrease in the number of those newly obtaining manufacturing license for fruit wines. In 2017, 39 new entities weregranted manufacturing licenses.
In such manner, as public interest in fruit wine (including grape wine) in Japan was on an increase, there had neverbeen any official labeling rules on wines.
For this reason, “Japan wine,” which is made exclusively from domestic grapes, and wines made from imported
concentrated fruit juice or imported wines, existed together in the market, causing the problem that distinguish one
from the other by referencing the label was difficult.
In such backdrop, in October 2015, an official labeling rule for wines, “Standard for Wine Production Process andQuality Indication” (hereinafter, “Wine Labeling Rule”) was established, with the objective to make the contents of label
easily understandable so that consumers could make proper selections.
This Wine Labeling Rule will enter into force on October 30, 2018. Shipments of “Japan wines” continue its growing
trend in 2016, an increase of 5.2% against previous year results. (Source: NTA General Condition of Domestic
Manufactured Wines (results from 2016 research) )Proper Management ofLiquor Administration
Proper Administration ofServices by Certified Public
Tax Accountants (CPTAs)■ Transition of Fruit Wine Shipments (Taxable Volume)（thousand kl）（thousand kl）

500

400

9,266

9,093

9,500
9,001

Total（Right axis）

8,963

8,936

8,8639,040
8,698

8,836

8,773

8,500

Fruit wine（Left axis）
Top：Imports
Bottom：Domestic production

8,000

200
163

167

186

207

245

255

259

266

155

157

81

81

83

83

88

95

99

110

110

113

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

254

114
2016

6,500
6,000

Statistics(Source: National Tax Agency Annual Statistics Report)

7,500
7,000

100

0

9,000

Evaluation ofPolicies

300

9,362（fiscal year）

National Tax Agency Report 201858

Ⅴ Proper Management of Liquor Administration
2

Outline of the Wine Labeling Rule
● According to the Wine Labeling Rule, fruit wines will be categorized as follows・ Japan wine: fruit wine manufactured within Japan, using domestic grapes exclusively
・ Domestically manufactured wine: fruit wine, etc.（＊）, manufactured within Japan, including Japan wine・ Imported wine: fruit wine, etc.（＊）imported from abroad( ＊ Fruit wine, etc. means fruit wine and sweet fruit wine.)● Of these, only Japan wines shall be labeled as “Japan wine,” and according to a certain set rules, the label may
display: ① geographic location, ② grape variety, and ③ year of grape harvest.
【When geographic location may be displayed】■ Display of location of wine production ⇒ if the location of harvesting the grape (over 85% of usage) andlocation of fermentation is located within the region of the indicated location■ Display of location of harvesting grape ⇒ if the location of harvesting the grape (over 85% of usage) is
located within the region of the indicated location■ Display of location of fermentation ⇒ if the location of fermentation is located within the region of indicatedlocation (with supplemental display that declares the respective location is not the location of harvesting thegrape, e.g., “Tokyo is not the location of harvesting the grape used as raw material.”)【Example of a front label of Japan wine】① Display of location② Display of grape variety

When the locationof wine production
may be displayed

When the locationof harvesting grape
may be displayed

When the locationof fermentation maybe displayed

Japan wine

Japan wine

Japan wineTokyo wine

Grape harvested
in Tokyo is used

Chardonnay

Chardonnay

Chardonnay

2018

2018

2018

● If over 85% of indicatedgrape variety is used

(In case multiple varieties are used, thevarieties shall be displayed in order ofusage weight)③ Display of year of grape
harvest● If over 85% of grape

harvested in the indicatedyear is used

Column 7

Wine fermented in Tokyo
Tokyo is not the locationof harvesting the grape usedas raw material

Initiatives to improve the brand value of liquor made in Japan

Promotion of the use of the Geographical Indication system
Under the Geographical Indication system for liquor, a liquor made from a ingredient or by production methodcharacteristically originated in a specific production area can exclusively label the production area.
The NTA has designated the following as a Geographical Indication so far (as of March 2018).
○ “Iki”, “Kuma”, “Satsuma”, and “Ryukyu” for spirits○ “Nihonshu / Japanese sake”, “Hakusan”, and “Yamagata” for sake○ “Yamanashi” for wine
The use of Geographical Indications may be effective in improving the brand value of Japanese liquor andpromoting exports. Therefore, the NTA has been promoting the use of the system through publicity and raisingawareness by means of creating pamphlets and holding explanatory meetings.
The total number of the Geographical Indications for Japanese liquor has become eight at present. We will makeJapanese Geographical Indications well-known such as “Nihonshu / Japanese sake,” a Geographical Indication ata country level, and other Geographical Indications in Japan, for example, by sending messages overseas with thegovernment and the private sector acting together. We will also urge the protection of these Geographical Indications
through international negotiations.

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National Tax Agency Report 2018

■ Designated Geographical Indications for liquor (as of the end of March 2018)
About the NTA

Nihonshu /Japanese Sake

Yamagata(Japan)(YamagataPrefecture)

Efforts to Enhance Servicesfor Taxpayers and to BoostEfficiency of Tax Administration

HakusanBarley(Hakusan-city,Ishikawa Prefecture)

Iki(Iki-city, NagasakiPrefecture)

Yamanashi(YamanashiPrefecture)

Kuma(Kuma-district and Hitoyoshi-city,Kumamoto Prefecture)

Satsuma(Kagoshima Prefecture[excluding Amami-city and Oshima-district])

Awamori(rice spirits)

Ryukyu(Okinawa Prefenture)* Information in parentheses
indicates the range ofan area of production

Product Category

Seishu/Sake

Remedy for
Taxpayer Rights

Sweet potato

Proper and Fair
Taxation and Collection

RiceWine
Shochu/Awamori(Spirits)

Proper Management ofLiquor Administration⑵ Initiatives to develop a fair trading environment in liquor

Proper Administration ofServices by Certified Public
Tax Accountants (CPTAs)

Since provision of an environment of fair trade is important for the sound development of the liquor industry,
the NTA announced and educated liquor businesses on the “Guideline for the Fair Trade of Liquor” (hereinafter,“guideline”) which was established and announced in August of 2006, and “Standards for the Fair Trade ofLiquor” (hereinafter, “trade standard”), which was established and announced in March of 2017. The NTA
promoted voluntary actions of liquor businesses aimed towards ensuring fair trade, while at the same time,carrying out fact-finding surveys on liquor trade (hereinafter, “survey on actual trade”), and issuing guidance forreform, when a trade is recognized as having issues, compared against trading standards.
Moreover, from the perspective of promoting voluntary action to ensure fair trade by liquor businesses, theNTA announces examples of major trades which are in violation of fair trade rules indicated by the guideline.

Evaluation ofPolicies⑶ Initiatives to ensure safety of liquor and enhance quality levels

National Tax Agency Report 2018

Statistics

The NTA works to ensure safety and high level of quality from the process of production to the consumptionof liquors.
Specifically, the NTA provides the liquor business operators with technical guidance and consultation
concerning the safety of liquors, examines safety, quality and labeling of commercially sold liquor. The results of
examination are provided in the NTA website.
With regard to the Fukushima No.1 Nuclear Power Plant accident, the NTA has been taking measures toensure the safety of liquors in alliance with the National Research Institute of Brewing by radioactive examination
on liquors.

60

Ⅴ Proper Management of Liquor Administration
National Research Institute of Brewing (NRIB)
National Research Institute of Brewing (NRIB) is, for the mission of NTA, namely,
proper and fair taxation of liquor tax and the sound development of the liquor
industry, performing advanced analyses and appraisals of liquor and conducting
studies and researches that may theoretically support its analyses and appraisals.
The NRIB is also providing human resources development courses that combine
advanced skills and practical management, and, for maintaining and strengthening
the manufactures technical level, holding Annual Japan Sake Awards. In addition,
the NRIB has recently been addressing measures on the basis of government’s
important policies including the promotion of Cool Japan Strategy, and enhancing
cooperation with related Japanese and foreign organizations as a national center forliquor.
For further details, please visit the NRIB website (http://www.nrib.go.jp/English/index.htm).
The NRIB distributes the latest information concerning liquor information
magazines and event information through its e-mail magazine. To register, please
send a blank e-mail to ssn@m.nrib.go.jp (Registration is also available with the codeon the right).

Analysis on liquor for export
QR code⑷ Response to social demands〜 Preventing inducement to improperly drink of liquors 〜Social demand for prevention of alcohol consumption by minors and for moderate drinking has become
strong. In June 2014, “The Basic Act on Measures against Health Problems Caused by Alcohol” was entry intoforce.
Based on the law, the government established the “Basic Plan on Promotion of Measures against HealthProblems Caused by Alcohol” through a cabinet decision in May 2016, which includes “prevention ofinducement to improperly drink of liquors,” and is engaged in advancing measures declared in the plan, withrelevant government offices and associations acting as one.
The NTA is making announcements and communicating with liquor retailers about observation of display
requirement in the alcohol sales sections, and on prohibition of liquor sales to minors.
In addition, for the purpose of assuring proper sales management of liquor, it became mandatory in June2017 for liquor sales managers, who shall be designated for each sales area, to participate in a liquor salemanagement training. The NTA will continue to promote actions to respond to the demands of the society,such as by increasing the opportunity for training and enhancing the training content concerning prevention of
inducement to improperly drink liquors.

〜 Recycling liquor containers effectively 〜
In order to ensure effective use of resources, the NTA keeps liquor business operators informed about therecycling of liquor container and reducing food waste generated in liquor manufacturing processes, etc.

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National Tax Agency Report 2018