Reducing allowance for duty-free cigarettes may bring legal challenges, legislators say

PUBLISHED : Friday, 07 May, 2010, 12:00am
UPDATED : Friday, 07 May, 2010, 12:00am

Legislators warned yesterday that reducing the number of duty-free cigarettes that a traveller may bring into Hong Kong from three packets to 19 cigarettes might induce duty-free retailers to launch legal challenges against the government.

The lawmakers, and a representative of duty-free retailers, were warning about a policy announced by Financial Secretary John Tsang Chun-wah in February's budget and due to take effect on August 1.

They say that the policy to cut the duty-free tobacco allowance would breach tendering agreements.

Professor Gabriel Leung, undersecretary for food and health, said at the meeting of the subcommittee on dutiable commodities yesterday that the allowance of no more than 19 cigarettes was aimed at minimising inconvenience to travellers.

'If we follow the Singaporean practice of zero allowance ... it won't be good for law enforcement, as smokers usually have an opened packet with them. Introducing zero allowance means they need to declare to customs and pay relevant duty for even one cigarette.'

Lawmaker Wong Ting-kwong, of the Democratic Alliance for the Betterment and Progress of Hong Kong, says reducing the allowance to no more than 19 cigarettes while not banning the sale of unopened packets of cigarettes at border crossings is self-defeating. 'Allowing the duty-free shops to continue selling unopened packets is like encouraging travellers to break the law.

'An unopened packet has more than 19 cigarettes. A traveller has to pay duty for or dispose of the one law-breaking cigarette or he has to consume it, which is forbidden in the border crossing.'

Wong said the policy change would bring legal risks, as duty-free retailers had signed tendering contracts with the government which took into account expected revenue from cigarettes when bidding for the right to run the business.

'The government might face judicial reviews launched by the duty-free retailers,' he said.

Contracts to run duty-free business at two piers with border crossings were signed with retailers by the Government Property Agency. Other contracts with retailers, to run businesses at the airport, and Lok Ma Chau and Sheung Shui, were signed by the Airport Authority and MTR Corporation respectively. The government is the major shareholder of the latter two organisations.

Wholesale-and-retail legislator Vincent Fang Kang doubted whether it was legal for the government to use a legislative amendment, as is currently proposed, to deprive retailers of business opportunities.

Simon Au Tze-kei, merchandising and buying director with the 13 duty-free shops jointly run by Sky Connection and Anway, says they may have to close their business and lay off 100 staff because of the policy change. 'The sale of cigarettes accounts for over 60 per cent, or HK$300 million, of our duty-free business every year,' he said.

Undersecretary Leung said the government would consider whether to ban duty-free cigarettes altogether in the long term, with the aim of creating a smoke-free Hong Kong.

Growing dependency

The number of cigarettes sold duty-free in the city rose from 360 million in 2008 to this number last year: 400m