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SCMP Reporter

PERFUME importers and distributors are still celebrating the decision of the Financial Secretary, Mr Hamish McLeod, to finally succumb to industry pressure and abolish the controversial duty on cosmetics and fragrances.

  Associations such as FABPIDA (Fragrance and Beauty Products Importers and Distributors' Association) have been lobbying since 1985 - the year the tax was introduced - to have the levy dropped.

   They attributed the 25 per cent tax to falling sales and claimed it had ruined Hongkong's image as a competitively priced shopping centre for international travellers.

   In fact, when the duty was increased to 30 per cent in 1991, the industry was up in arms.

  But the March 3 Budget, which scraped the taxes, was greeted with general satisfaction by those in the cosmetic business.

   Cosmetics and perfume importers are now in the process of reducing their prices in line with the duty-free rates.

   American giant Elizabeth Arden has already taken out extensive print advertisements announcing new, lower prices. So has the Body Shop with its new ''Good Buy'' campaign. It is slashing prices by an average of 12 per cent on all dutiable products.

  Mr John Bartley, the Hongkong managing director of the French fashion, perfume and cosmetic house Chanel, said the tax was ''ill imposed'' in the first place.

  ''We had been lobbying through associations that the idea was to increase tourist and local purchases. Now that the tax has been dropped, it may take a little time to work through our stock and reduce prices,'' he said.

   ''Certain houses have more duty-paid stock, so it is difficult to say when we will notice price differences.''   Still, an average drop in prices of 10 per cent is the forecast for make-up and fragrances.

  ''It is going to take time to build up. The word will have to filter out that Hongkong is now a cheaper place to buy cosmetics and perfumes,'' Mr Bartley said.

  ''That could take up to six months before the news gets around to our key tourist markets. But, when that happens, we can expect a 10 to 15 per cent increase in sales.''   The French Trade Commissioner, Mr Yves de Ricaud, was ''absolutely delighted'' at the news, and said it was high time Hongkong regained its position as a shoppers' paradise.

  Mr de Ricaud said the government could no longer justify imposing taxes on cosmetics and fragrances given the nature of other high-duty imported items such as alcohol, cigarettes and cars.

  ''This was done for health or convenience reasons, but, in the case of cosmetics and perfume, it could not be justified.

   ''Based on that point of view, we knew it was just a matter of time before the government scrapped the tax. We all knew it was chasing business away, given the tax-free situation in Singapore.

  ''Finally, the government became aware of this,'' he said.

  Mr de Ricaud has been liaising with the French Perfumers' Association of Paris, informing it that the abolition of the tax had to be taken into account when re-evaluating prices.

  ''They are aware of the need to decrease prices. That is why we believe the impact will be quick, and we should be seeing a difference in the retail sector quite soon,'' he said.

  Sales of all French products in Hongkong last year increased by about 20 per cent, but there was a marginal drop in sales of perfumes and cosmetics - something industry insiders again attributed to the tax.

  A spokesman for French perfume house Jean Patou said the company was looking forward to good sales in the medium to long term, and that Japanese tourists - traditionally part of a buoyant market - will return to buy their perfumes and cosmetics in Hongkong.

  ''They all became much more sensitive to prices. They came in to our shops with calculators and they knew what prices were in the airports and other duty free areas.

   ''Now, they will realise that our prices in Hongkong are really competitive with other duty-free areas of the region, and there will be more sales in the local market,'' the spokesman said.

  A spokesman for FABPIDA, outspoken anti-tax lobbyist Mr Dominique Vessigault, agreed Hongkong was once again on its way to becoming a shoppers' paradise.

  ''That is the greatest advantage. The territory's image was greatly tarnished by tax and everything became so expensive.

   ''People tended to buy less, so, hopefully, this will now change.'' Mr Vessigault said the government finally viewed the tax as an ''aggravation'' and that cosmetics and perfumes were not in the ''luxury'' category that they warranted a tax levy.

  ''At one stage that may have been the case, but there are other items that are not taxed which could definitely be considered luxury.

     ''Most women use cosmetics every day, so it can't fall into that category,'' he said.

  Mr Vessigault said Hongkong began losing its place to Singapore and Taiwan, which were becoming much more competitive.



No more taxing times as industry celebrates victory