The South Korean Government is planning to remove a special excise tax on deer velvet which has been a source of frustration for the New Zealand deer industry for several decades.
The referred to as SET, the tax is applied to several ‘luxury’ products, including dried and frozen deer velvet. For velvet, the excise tax is seven per cent, however when additional taxes were added to it, the effective rate was 10.1 per cent.
Velvet from stags such as these will could be free of taxation from Korea next year. Photo Elaine Fisher. DINZ market manager Asia, Rhys Griffiths, says the SET is being eliminated in two stages. The first cut, which removed 30 per cent of the tax, took effect in late August. The second cut, which will take it to zero, depends on final approval of legislation now before the South Korea National Assembly. Reports suggest it will take effect on January 1, 2016. “In addition to the removal of the tax, legislation is being considered that will give effect to South Korea’s free trade agreements with China, Vietnam and New Zealand. Under the Korea-New Zealand FTA, the 20 per cent tariff on dried velvet imports from New Zealand will be reduced by 1.33 per cent a year. “The first (2015) cut of 1.33 per cent will take effect once the FTA becomes law. In New Zealand the legislation that will bring the FTA into effect has passed its third reading and we are hopeful the Korean government will approve and implement the FTA this year. If this happens, it will be followed by the 2016 cut of 1.33 per cent on January 1, 2016. “Taken with the removal of 10.1 per cent in SET-related taxes, this could mean a reduction of nearly 13 per cent in taxes and duties on dried velvet exports to Korea during this season. There will be no change to the duty rate on frozen velvet, but removal of 10.1 per cent in taxes is still significant.” Rhys says these changes are “hugely meaningful” for the NZ velvet industry over the longer term. “Import duties and excise taxes are an unnecessary burden carried by producers and consumers for no real benefit. Also, tariff reduction and removal of the SET will make NZ processors more competitive with their overseas counterparts, making it more attractive for Korean buyers to source their velvet directly from New Zealand.” He says the industry is getting a growing number of approaches from corporates, as well as suppliers to oriental medicine doctors, who want to source their velvet directly from New Zealand using transparent channels. This is in the interests of NZ producers because it helps ensure the integrity of NZ velvet on its long journey to the customer.
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