A Kobe brewery has incurred the wrath of Japanese authorities for ‘deceptive labelling practices’ that allowed them to qualify for a reduced tax rate.
The brewery in question, I.N. International, producers of Rokko Beer, have operated in Kobe’s Kita Ward since 1997 and introduced a controversial practice in 2020 by adding sugar to its canned alcoholic beverages. This decision was driven by a surge in demand during the COVID-19 pandemic and aimed to extend the shelf life of products stored at room temperature on store shelves.
The issue arose when I.N. International persisted in labeling these products as “beers” over the following three years. According to Japanese liquor laws, beverages can only be legally considered as beer if they do not contain added sugar or sweeteners. Products with added sugar fall under the category of “imitation beer.”
Small brewers are entitled to a 15 percent reduction in liquor tax for dealing in beer, a benefit not available for imitation beer. Despite this, I.N. International reported to the tax office that its imitation beer products were beers, enabling them to sell thousands of litres monthly at the reduced tax rate intended for genuine beer.
Despite being considered a pioneer in Japan’s local brewery industry, the brewery now faces hefty fines for inaccurately labelling their canned beverages as “beer.”
An investigation conducted by the Osaka Regional Taxation Bureau uncovered that the brewery had received over 4 million yen ($26,000) in tax breaks for beer during the three-year period due to the mislabelling. The investigation concluded that the brewery should have filed a tax return for imitation beer.
I.N. International now faces the prospect of paying back the 4 million yen, along with fines for underreporting its taxes. In response to inquiries from Asahi Shimbun, Manabu Nakajima, the president of I.N. International, declined to provide detailed information on “brewing methods or tax matters” but emphasized the company’s commitment to legal compliance and efforts to align with tax regulations under the guidance of a knowledgeable tax accountant.
Rokko Beer, is known for its diverse lineup, including Rokko Pilsner, Rokko Porter, Rokko IPA, and Rokko Barley. Despite the recent controversy, their products continue to be available not only in the greater Tokyo metropolitan area but also in the Tohoku and Kyushu regions. Sales data from Teikoku Databank Ltd. indicates a decline in the corporation’s sales from 90 million yen to 50 million yen in the fiscal year ending March 2021.