Three Societies founder and Chief Spirits Taster Bryan Do engages in an interview with The Korea Times at the distillery in Namyangju, Gyeonggi Province, Sept. 3, with a Ki-One bottle shown. Korea Times photo by Shim Hyun-chul

NAMYANGJU, Gyeonggi Province — Current taxation and regulations on the country's liquor industry have been hindering local whisky distilleries from producing finer, more competitive spirits, according to the founder and chief spirits taster (CST) at Three Societies, a whisky distillery in Namyangju, Gyeonggi Province.

Bryan Do, who founded the distillery on a wooded mountaintop in 2020, says that revising the Liquor Tax Act and eliminating ineffective rubber-stamp regulations will ease the financial burden on distillers, allowing them to produce and sell their products at lower prices and potentially spur the industry's growth. He also cites the local regions with significant temperature fluctuations as ideal for whisky production.

At the heart of the legal challenge, according to Do and other experts in the country's liquor market, is the fact that whiskies are currently taxed based on their assessed value (ad valorem tax). This contrasts with per unit tax, which is based on a fixed amount per product. Do argues that whiskies should be taxed per unit instead, as the current ad valorem tax creates an uneven playing field that favors imports and discourages local distilleries.

According to the Whisky Society of Korea, local whiskies are taxed on all three components of their release price—manufacturing cost, distribution cost, and sales-and-administrative expenses. In contrast, imported whiskies are taxed only on the import price, excluding distribution and sales expenses. This results in higher taxes for local spirits.

“We're slapped with way more tax than imports, which is unfair,” Do said in an interview with The Korea Times. “What we produce domestically should basically be cheaper than what we import. This is not just unfair for us. It's unfair for consumers as well because we cannot provide them with cheaper whiskies.”

The ad valorem tax, according to Do and like-minded analysts, benefits imported whiskies and discourages local distilleries from investing in their products to reduce production costs and taxes. Do argues that this tax system prevents local distillers from exploring new flavors and enhancing quality, leading to spirits that are overly similar and lack diversity.

The per unit tax, on the other hand, is seen as a game-changer for local distilleries. By reducing the tax burden and creating a fairer playing field for local whiskies compared to imports, it encourages local distilleries to enhance their craftsmanship and increase the use of local natural ingredients.

“The government had categorized liquors under either of the two tax systems to originally protect the country's traditional liquors like makgeollis (rice wines). But the liquor market has changed since and our traditional liquors are no longer enjoyed within the country only but sought out globally,” said Do.

Makgeolli and beer are currently levied per unit taxes while whiskies, brandies, liqueurs and other distilled liquors are levied ad valorem taxes.

“Among OECD countries, only three nations, including Korea, subject whiskies to ad valorem tax. As many advanced countries have opted per unit tax for their whiskies, so should we,” he added.

Do stands inside one of Three Societies' storage rooms in Namyangju, Gyeonggi Province, where oak casks filled with fermented whisky wash are going through aging, Sept. 3. Korea Times photo by Shim Hyun-chul

Some outdated practices in the industry also pose hurdles to its advancement, according to Do. He highlighted radio frequency identification (RFID) stickers as an example of such measures. Do argues that these stickers — used as anti-theft devices and designed to tear when bottle caps are opened — have become redundant for manufacturers and contribute to higher retail prices for whiskies.

“The government introduced RFID to the liquor industry more than a decade ago to prevent bootleggers from filling empty bottles with false contents. But this supposed tracking device has been shunned by many manufacturers and has become rather useless,” Do said. “Each sticker costs us 800 won ($0.60) which we ship out for 1,500 won in retail, an extra for consumers to additionally pay. And without RFID, we're legally banned from making sales. This is just one of those outdated restrictions that should be updated.”

Developing Korean whiskies

Three Societies — named to honor its U.S.-born founder raised in California, Scottish Master Distiller Andrew Shand, and local Korean consumers — produces whiskies under its signature brand, Ki-One, the first single malt whisky made in Korea. The company has filled 4,800 oak casks so far and shipped out 150, with the remainder currently aging. The products have demonstrated quality, with various editions of Ki-One winning four medals in international spirits competitions, including one in San Francisco, during 2022-23. The distillery has exported Ki-One to the U.S., Japan, Singapore, Taiwan, Hong Kong, and the U.K.

Do said that Korea's climate conditions are exceptionally well-suited for whisky aging. The country's wide range of temperatures across its four distinct seasons throughout the year, allows the wash (fermented alcohol before distillation) to evolve and improve in quality. His distillery's location, facing north and nestled against a steep mountain slope with ample sunlight and shade, experiences extreme summer heat and winter cold. This environment helps the barrels extract the maximum flavor from the wash. Such aging, which takes up to two years, produces richer flavors compared to casks stored underground at a uniform temperature for even longer periods, according to Do.

“I was inspired by gochujang (red hot pepper paste) for Ki-One's strong body and finish. If Japanese whiskies are like mild miso soup, ours would be like strong soybean paste soup,” said Do, comparing his whiskies to Japanese imports in Korea, which have a much longer history and broader global popularity. With this year marking the 100th anniversary of Japanese whiskies, they have been in high demand in Korea.

“In due time, we'll make just as good whiskies, if not better, because our flavor profiles are different — more flavorful and spicier. We already have enthusiasts for Korean whiskies who, last year, waited 36 hours outside our distillery for the first batch of Ki-One.”