Health issues cannot be ignored in debate on abolishing wine tax

PUBLISHED : Thursday, 14 February, 2008, 12:00am
UPDATED : Thursday, 14 February, 2008, 12:00am

The case for the abolition of wine tax in Hong Kong based on claims that wine is less associated with alcoholism - and, by implication, less harmful than beer or spirits - is dubious and controversial.

It is the quantity of alcohol consumed, not the nature of the drink that matters. Social factors, tradition, availability and price all influence the quantity of alcohol consumed, which then affects human health. Thus the claim that wine is inherently less likely to cause alcoholism than other alcoholic drinks is unfounded.

Second, the notion that a further reduction in the tax on wine will not lead to increased consumption is counterintuitive. It appears that more wine was consumed in 2007. Clearly less tax is, at least partly, responsible for this increased consumption but the robust economy is likely to be the major factor. Increased disposable income has probably stimulated demand as much as tax reductions that may not have been passed on to the ultimate consumer. But if the retail price of wine does fall, logic dictates that consumption will rise, which may have long-term health effects.

Thirdly, the wine lobby equates the abolition of wine tax in Hong Kong with the creation of a major fine wine trading centre, but this is nonsense. London has both excise duty and value added tax on alcohol. A trading platform for wine in Hong Kong crucially depends on the availability of sufficient air-conditioned, bonded warehouses due to the hot and humid climate. Wine in bond is not taxed in Hong Kong as wine in bond in London is not taxed. Tax enters the equation only when the dutiable goods are removed from the warehouse into Hong Kong or Britain. Trading and then selling on wine raises no tax issues at all. Thus, the wine traders should argue for more air-conditioned bonded warehouses, not a reduction in the domestic wine tax.

Finally, as a wine drinker, I am all for cheaper wine. But I am very doubtful whether any tax reduction would actually be handed on to the consumer as greedy wine suppliers, retailers and restaurant proprietors would most likely keep prices unchanged and merely increase their profit margins, as they did last year.

Mark Williams, Tsing Yi