Another round for beer drinkers as duty unaltered
Alcohol BEER drinkers were the biggest winners from Sir Hamish's firm stance over the alcohol duty rate system, which remains unchanged.
Tipplers at the top end of the market were left with the biggest hangover.
The Financial Secretary promised to review the new percentage-based alcohol tax collection system which has caused confusion since it was introduced last year.
But he said more time was needed to assess the effect of last year's dramatic overhaul.
The Government resisted pressure from the industry and kept to the duty system which imposes 100 per cent duty on liquor above 30 per cent alcohol content, 90 per cent on wines, champagne and sherry, and 30 per cent on beers.
The ad valorem system based on value at source encouraged imports of cheaper beer much to the dismay of local brewers Carlsberg and San Miguel. The 100 per cent tax on spirits also infuriated the Liquor and Provision Importers Association.
'We were very disappointed that the Financial Secretary did not abolish the ad valorem tax and duty system for wines and spirits,' an association spokesman said. Prior to last year the system was a combination of flat rate and percentage of value.
'In the past 12 months we have drawn the Government's attention to the increasing incidence of wines and spirits being smuggled into Hong Kong resulting in falling tax and duty collections.' He said the association would continue to press the Government for a single rate of tax for all drinks based on alcohol volume.
Chairman of the Hong Kong Hotels Association, Thomas Axmacher, said he had been 'praying each night' for lower tax.
'The alcohol and wine tax has drastically affected us on a daily basis - we are reminded of it every day,' Mr Axmacher said.
'It sets a very bad image for Hong Kong of being a very expensive city. The danger is if we don't change the perception in people's minds that Hong Kong is too expensive we will lose out in tourism to places like Bangkok.' Sir Hamish said he considered introducing a duty cap for more expensive liquors, but felt this would have undermined the logic of an ad valorem system.
'These are early days to assess fully the impact of the system,' he said. 'But there is no evidence yet to suggest that the new system has resulted in reduced revenue yields at this upper end of the market.' But Carlsberg general manager Flemming With-Siedelin said there was ample evidence to suggest low yields from duty payable on beer because local brewers had not yet paid all the duty.
'We are unable to work out what duty needs to be paid,' he said. 'We would like the Financial Secretary to tell the Customs and Excise Department how to sort this out.' He said the ad valorem system had created a market ripe for cheap imported beers which had kept prices down due to increased competition.