The South Korean Government is planning to remove a special excise tax (SET) on deer velvet, an impost that has been a source of frustration for the deer industry for several decades.
The tax is applied to several ‘luxury’ products, including dried and frozen deer velvet. For velvet, the excise tax is 7 percent, however when additional taxes were added to it, the effective rate was 10.1 percent.
Deer Industry New Zealand (DINZ) market manager Asia, Rhys Griffiths, says the tax is being eliminated in two stages. The first cut, which removed 30 percent 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 1 January 2016.
“In addition to the removal of the SET, 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 percent a year,” Griffiths says.
“The first (2015) cut of 1.33 percent 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 percent on I January 2016,” says Griffiths.
“Taken with the removal of 10.1 percent in SET-related taxes, this could mean a reduction of nearly 13 percent 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 percent in taxes is still significant.”
Griffiths says these changes are “hugely meaningful” for the New Zealand 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 New Zealand 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 New Zealand producers because it helps ensure the integrity of New Zealand velvet on its long journey to the customer.