Closing the tax loopholes that beer companies use to evade taxes; alcohol tax reform to be launched this year

The tax authorities are strengthening the administration of excise tax on consumption, and now they have new moves. This time, the focus is on the beer industry.

Recently, the State Taxation Administration published the “Announcement on Relevant Issues Concerning the Collection of Excise Tax on Beer” (hereinafter referred to as the “Announcement”), which adjusts the tax base used by beer production enterprises for calculating tax. Specifically, starting from April 1, for beer sold by beer production enterprises (hereinafter referred to as the “production enterprises”), the higher of the production enterprise’s ex-factory price and the associated sales unit’s outward sales price shall be used as the standard to determine the excise tax amount, and the excise tax unit amount for that beer shall be determined accordingly.

Tian Zhiwei, dean of the Institute of Public Policy and Governance at Shanghai University of Finance and Economics, told First Finance that previously, the standard for excise tax for beer production enterprises was based on the associated sales unit’s outward sales price. Now it has been changed to the higher of the production enterprise’s ex-factory price and the associated sales unit’s outward sales price. This avoids some beer companies using the previous policy to evade tax.

Excise tax is China’s third-largest tax category. It is levied on special consumer goods, and beer is one of them. Beer is taxed on a per-ton basis, with two tiers: Class A and Class B. According to regulations issued by the Ministry of Finance and the State Taxation Administration, when the ex-factory price per ton of beer (including packaging materials and packaging deposit) is 3,000 yuan or more (including 3,000 yuan, excluding value-added tax), the unit tax amount is 250 yuan/ton. Entertainment and catering enterprises’ home-made beer also applies this standard (Class A). When the ex-factory price per ton of beer is below 3,000 yuan (excluding 3,000 yuan, excluding value-added tax), the unit tax amount is 220 yuan/ton (Class B).

Obviously, if the ex-factory price of beer production enterprises is lower than 3,000 yuan per ton, the lower excise tax amount applies. For many beer production enterprises, excise tax is the main tax they pay. Taking a listed beer company as an example, its 2025 performance data shows that excise tax paid in 2025 exceeded 1.7 billion yuan, accounting for about 73% of taxes and surcharges.

Therefore, in practice, some beer production enterprises have come up with a wrong idea: by selling beer at a low price to associated sales units, they make the ex-factory price fall below 3,000 yuan per ton so as to apply a lower excise tax unit amount, while the associated sales units then bulk-sell it to the outside at normal beer prices.

To crack down on this tax evasion, in 2002 the State Taxation Administration issued the “Reply on Certain Issues Concerning the Collection of Excise Tax on Beer,” adjusting the method for determining the excise tax amount in the beer industry. In short, it is no longer the sales price from a beer production enterprise to its associated sales unit that serves as the standard for determining the tax amount; instead, it is changed to the outward sales price of the associated enterprise.

Under this provision, some beer companies also produced new tax-evasion techniques. Specifically, a beer production enterprise sells beer to its associated sales unit at a price higher than the normal ex-factory price, and then the associated sales unit bulk-sells it to the outside at a price below 3,000 yuan per ton. Under the rule mentioned above that uses the sales price of the associated enterprise as the standard for determining the tax amount, the beer production enterprise can still enjoy the lower tax amount standard, thereby achieving the purpose of paying less excise tax.

And under the latest adjustment in the above “Announcement,” whichever is higher—the beer production enterprise’s ex-factory price or the associated sales unit’s outward sales price—is used to determine the applicable excise tax amount, thereby closing the above tax-evasion loophole.

When the Goods and Services Tax Division of the State Taxation Administration interprets the “Announcement,” it gives an example. Suppose a beer production enterprise’s weighted average ex-factory price for A-brand beer in April is 3,294 yuan/ton. In 2026, its three associated sales units all sold A-brand beer to the outside in April, with a weighted average outward sales price of 2,656 yuan/ton. According to the “Announcement,” because the ex-factory price of A-brand beer is higher than the outward sales price, the ex-factory price (3,294 yuan/ton) should be used as the standard to determine the excise tax amount. Excise tax should be levied as for Class A beer (above 3,000 yuan/ton), with a unit tax amount of 250 yuan/ton.

Tian Binbin, deputy dean of the School of Finance and Taxation at Zhongnan University of Economics and Law, told First Finance that the purpose of this “Announcement” is to curb tax-evasion behavior in which some beer production enterprises use their associated sales units to manipulate beer prices so as to qualify for lower excise tax unit amounts. In fact, this is not limited to the beer industry. Since excise tax currently is basically levied on the production stage, and the tax base is mainly calculated based on the sales revenue of the taxable products, it is relatively common for some enterprises to evade taxes by lowering the selling price at the production stage through transactions with related parties. Moreover, such related-party transactions are largely concentrated between parent and subsidiary companies, mainly because while related-party transactions reduce the tax base, they also reduce profit at the production stage. This requires that the transactions be carried out within a relatively controllable scope, and there is no doubt that the risk is lowest between parent and subsidiary companies.

Tian Binbin suggested that for the above cases in which some enterprises evade taxes through related-party transactions, the tax authorities can strengthen tax collection and administration, improve related-party transaction identification mechanisms, and establish a related-party transaction risk early-warning model based on transaction-level data such as transaction amount, transaction counterpart, transaction proportion, and so on. They can also use information-based tax collection and administration technologies to conduct in-process monitoring and post-event review of transfer pricing behavior.

He also said that although the current excise-tax collection model for the production stage has relatively high administrative efficiency, the occurrence of related-party transactions still greatly weakens the tax base of excise tax. The fundamental approach to address the problem is to shift the administration link toward the end user—that is, to return to the essence that excise tax is levied on consumers’ consumption behavior of products, by anchoring the final product consumption price. In the future, under the premise that administration is controllable, it may be possible to move part of the excise tax collection stage to later points.

In this year’s Government Work Report, when deploying to advance reforms of fiscal, tax, and financial systems, it states that it will adjust and optimize the scope and tax rates for excise tax, and advance the shifting of the collection stage for some items to later points. Several fiscal and tax experts told First Finance reporter that this year’s excise tax reform may have new developments, and increasing the leverage of excise tax regulation to increase fiscal capacity could be an important direction for reform in the future.

Data from the Ministry of Finance show that in the first two months of this year, domestic excise tax revenue was 382.7 billion yuan, down 6.2% year over year. This is mainly due to the decrease in excise tax on cigarettes. Meanwhile, according to this year’s central government fiscal budget, domestic excise tax revenue is expected to be 1.701 trillion yuan for the full year, up 0.9%.