Brewers' claims rejected

PUBLISHED : Thursday, 23 June, 1994, 12:00am
UPDATED : Thursday, 23 June, 1994, 12:00am

THE Financial Secretary Sir Hamish Macleod yesterday rejected claims that the new alcohol duty system was unfair.

The previous system had an anomaly under which more expensive products paid a smaller percentage of duty than cheaper ones.

The new arrangement would ensure the tax burden fell more equitably on the drinking population.

''Those who can afford to pay more, should pay more,'' he said.

Sir Hamish denied that the new system would trigger an increase in alcohol smuggling as some legislators had suggested.

The duty on some alcohol used to be more than 400 per cent and there was no large scale smuggling.

It was impossible to argue that the new system, which would bring about a reduction in duty on most products, could lead to more smuggling.

Sir Hamish's comments came as legislators debated the Dutiable Commodities (Amendment) Bill 1994 which seeks to change the way alcohol tax is calculated - from a flat rate plus a percentage increase in seven categories to a percentage basis in three categories.

The bill has been attacked by two local breweries, who claim it will give importers an unfair advantage.

But Sir Hamish said the same valuation method and the same ad valorem duty rate would be applied to local and imported products.

The new ad valorem system would reduce duty in every broad category ranging from six per cent to 75 per cent.

Some would face a duty increase but they were mostly at the upper end of the market. And he did not believe their sale would drop as a result.

The new arrangement would increase competition in the beer market because the previous specific duty imposed a threshold below which it was not worthwhile to import certain cheap products.

But independent Simon Ip Sik-on moved an amendment to restore the old system.

He said the new system would bring only marginal levy reductions on some popular beverages, but would cause ''prices on higher quality drinks to go through the roof''.

''It seems to me the new system is punitive, not progressive,'' he said.

Mr Ip said the new system provided great incentive for smugglers.

While a stolen Mercedes-Benz might fetch several hundred thousand dollars on the market in China, a smuggler stood to make about $2.5 million on a consignment of XO cognac on a speedboat trip.

''To deny that this will create a temptation for smuggling, as the administration has done, is to defy common sense,'' he said.

Vincent Cheng Hoi-chuen said what the Government had proposed was to force consumers to shift to low quality liquor.

But United Democrat Huang Chen-ya said most drinkers in Hong Kong consumed so they would benefit from the changes.

Only a small minority of people drank expensive wines and it was unfair to restore the old system for the sake of this small group at the expense of the majority.

And he was critical of the local breweries' increase of price.

''If they are really scared the new system will erode their competitiveness, why do they continue to raise their prices?''