Don't cut duty on alcohol this year, says beer coalition

PUBLISHED : Friday, 01 February, 2008, 12:00am
UPDATED : Friday, 01 February, 2008, 12:00am

A coalition representing the brewing industry wants the government to put any possible cuts in alcohol duty this year on hold, despite pressure by wine and spirits merchants for further reductions.

Claiming the social and economic effects of last year's cut in beer duties to 20 per cent from 40 per cent were mixed and not fully understood, the Hong Kong Beer Coalition said alcohol duties should remain unchanged in 2008-09 because more time was needed to evaluate the situation.

Financial Secretary John Tsang Chun-wah will deliver his maiden budget speech on February 27 and is expected to make use of the likely HK$100 billion-plus surplus to announce tax cuts.

Steven Co, chairman of the coalition and a senior manager at San Miguel Brewery Hong Kong, said: 'We are not saying we would not welcome zero beer duties, but we recommend that the government keep the status quo this year. It is a timing issue.'

The Beer Coalition is keen to avoid a zero-tax environment for the time being although there is room for further cuts, said member Jennifer Kho, general manager of Jebsen & Co's beer division.

Last year, the coalition had wanted beer duties to fall to 10 per cent, but got 20 per cent. This means the coalition is open to a further 10-percentage-point drop in duties.

'Going to zero is different from going to 20 per cent,' said Terry Yu, deputy general manager of Carlsberg Hong Kong. 'Going to zero is like saying beer is a can of Coke. It sends a very different message.'

However, a brewery-industry source said that if the government reduced wine duties to zero, it would only be fair to do the same for beer.

Last week, the Hong Kong Wine and Spirits Industry Coalition urged the government to scrap the 40 per cent wine duty and halve taxes on spirits to 50 per cent. Major wine dealers say zero taxes would help build Hong Kong into a hub for fine wines, something the Beer Coalition disputes.

'The Beer Coalition hasn't been pursuing duty reductions as much as the wine industry ... We see more of an immediate opportunity, which is the fine-wine hub,' said Boris de Vroomen, managing director of Moet Hennessy Diageo Hong Kong and co-chairman of the wine and spirits coalition.

While the price of wine fell by as much as 15 per cent after last year's cuts, the brewing industry came under fire for failing to pass on tax savings to consumers. On average, beer drinkers saved between 10 HK cents and 20 cents a can, below the maximum 29 cent reduction in average duties the government said beer firms were supposed to pass on.

This fuelled accusations of corporate greed and forced major breweries to go before the Legislative Council to explain themselves.

Mr Yu said there was misunderstanding because the price adjustment varied according to how breweries and importers used the lower alcohol duties.

The Beer Coalition represents about 80 per cent of the local beer market, while the wine and spirits coalition represents more than 80 alcoholic brands.