The Director General of The Scotch Whisky Association, Hugh Morison, said: "These proposals are unacceptable. Whisky and brandy, the most heavily taxed categories, will benefit from only a marginal tax reduction (from 130% to 104%). While the same rate will be applied to the local spirit, soju, its much lower production costs mean the effective tax burden will be considerably less for domestic spirits than for imported Scotch Whisky.

"The proposed liquor tax rate is way above the revenue neutral rate for spirits and the proposed reform is clearly being used by the Korean government to pay for proposed beer tax reductions."

"The proposals fail to eliminate the additional burden of education tax on spirits, which the Korean government had previously indicated it would abolish."

To press their case, the SWA has joined with other European spirits producers to urge the European Commission, working closely with the US Government, to reject these proposals. The industry is seeking reform which not only complies with the letter of the WTO ruling, but also provides improved market access for imported spirits.

Mr Morison added: “We believe the fairest solution is for all spirits to be taxed at the same rate according to alcohol content as in most industrialised countries.”

Note for Editors

The World Trade Organisation (WTO) Dispute Settlement Body has ruled that Korea is in violation of its international obligations because it discriminates against imported distilled spirits by applying much higher liquor and education tax rates than it applies to domestically produced soju.

The WTO has ruled that, since all distilled spirits are directly competitive or substitutable products, they should be similarly taxed, and requires reform of Korea’s present tax regime by 31 January 2000.

Current/Proposed Rates are:

* Education Tax is calculated as a percentage of Liquor Tax. Thus the total tax burden for all spirits under the proposed new tax arrangements would be 80% + (30% x 80%) = 104%.