Government's grape expectations lack body

PUBLISHED : Friday, 14 March, 2008, 12:00am
UPDATED : Friday, 14 March, 2008, 12:00am

The thin line between optimism and mendacity has been tested again by official claims that the abolition of duty on wine will create 'thousands of jobs'.

The supposed employment-boosting benefits of cutting wine duty were first proclaimed by Financial Secretary John Tsang Chun-wah. He has now been supported by the government-sponsored Trade Development Council, which has conjured up an interesting figure claiming that wine imports to the mainland will reach HK$7 billion by 2017. And, just in case you're not impressed by that figure, wine sales in Asia, say the council, will reach a record HK$210 billion that year.

The council's 'experts' conclude that the value-added economic benefits of wine sales to Hong Kong will exceed HK$1 billion by 2012. This is all very splendid and may be true. Or, it may not, because these benefits are based on market forecasts for a decade ahead, and such forecasts are almost always wrong.

Moreover, why is it axiomatic that, just because Hong Kong has abolished wine duty, it will attract the bulk or even part of the growing wine business in Asia? This inconvenient question has yet to be addressed by the fine minds at the council.

Don't get me wrong, as a wine drinker and someone whose business involves selling wine, I am all in favour of the duty being abolished. But, please, spare us the hypocrisy that surrounds this move.

What seems to have happened is that the government has finally caved into pressure from well-heeled wine consumers who have the ear of those in power. As a result, wine duty has been removed and, to demonstrate a semblance of populism, beer duty has gone, as well.

Why, then, is duty still levied on spirits? Considering that brandy is a wildly popular spirit in China, would not Hong Kong become a brandy hub were duty to be removed from purchases? The truth is that this is all pie in the sky. There is no more guarantee of Hong Kong selling more cases of brandy to mainland China because it is tax-free than there is of selling more wine for the same reason. The duty still has to be paid when the goods arrive on the mainland.

However, it sounds so much better to couch this tax abolition in terms of job creation rather than in terms of saying that it might encourage the wine-loving chief secretary, Henry Tang Ying-yen, to bring home his large stock of fine wines currently residing in British warehouses.

If the government were to do something really radical, it could try telling the truth and say that the abolition of wine and beer duty is a shameless bid for popularity and that giving the public cheaper alcohol (excluding spirits) will simply add to the sum of human happiness. Personally, I'm already happy that this move has caused so much upset to the dreary band of moralising do- gooders who spend their lives in search of ways to make us all more miserable. I would be even happier if they could be further exercised by a cut in tobacco tax, but that's almost certainly too much to hope for.

So, there's nothing wrong with this tax abolition in itself. But there is a lot wrong with the spurious claims being made as to its impact and, lamentably, there is something to worry about in the gullibility of the uncritical reports of these claims.

This is not to say that the abolition of the wine tax will not create any jobs. It may even persuade some international wine auctioneers to hold events here. But it is very hard to imagine that this reform will herald the arrival of beer auctions, for the simple reason that there are none. Therefore, maybe a few auctioneering jobs will materialise. Then there may be a few more warehousing jobs and, hopefully, cheaper wine will boost demand, leading to more people being employed selling wine.

Does this add up to 'thousands of jobs'? Where is the smallest scrap of evidence for this claim? Perhaps, however, after a few glasses of the cheaper stuff, we'll begin to believe it.

Stephen Vines is a Hong Kong-based journalist and entrepreneur