The day after the announcement, guests were asking, 'Where's my reduction?',' says Ivan Fernie, general manager of Aqua restaurant in Tsim Sha Tsui, of last month's budget cut on wine and beer duty. 'But after the first week, no one said anything.' Even before the announcement, Fernie, who looks after the wine list for the Aqua Group's nine outlets, had been hoping Financial Secretary Henry Tang Ying-yen would cut wine duty. When he did, says Fernie, 'we thought finally we could put out wines at prices customers can afford - but in the end, the pass-on reduction isn't that much'. He says the company is passing on savings, however small. Matthew Siegel, manager of the Press Room in Central, says percentage cuts 'in double digits' will be passed on to customers from May 1. In anticipation of growing demand he's boosting wine storage capacity. At the Peninsula hotel, director of food and beverage Thomas Rooch says: 'We're certainly committed to passing any savings on to our guests where possible.' Such comments are at the crux of the debate about whether the consumer is actually getting the benefit of the duty cut. It's a complicated issue. To begin with, a drop in duty from 80 per cent to 40 per cent doesn't equate to a 50 per cent drop in price, but something closer to 20 per cent. Fixed costs remain, including shipping, warehousing, office rental, delivery and administration. A case of 12 bottles that comes in from Australia at A$100 (HK$650) can end up at HK$130 per bottle when it's sold by the importer. Hotels and restaurants then mark up bottles by about three times the wholesale price. Strong currencies in Australia and Europe add to that price. 'We found that some of our prices are very out of date,' says Claudia Capelvenere of Italian wine specialist Valdivia. 'We have just gone on to the next vintage without adjusting prices. On our new list, some of our wines will probably remain at the same price they were when duty was 80 per cent.' With the euro up 12 per cent in the past year, Capelvenere reports price rises from European vineyards of 5-25 per cent. Then there's the issue of existing, duty-paid stock. A medium-sized importer may be holding 50,000 to 80,000 bottles taxed at the old in addition to consignments (whereby a hotel pays for a bottle only when it's sold, and can return stock to the supplier at any point). Industry insiders say that, given these variables, it could be six months before things settle down. A number of interested parties seem unwilling to enter the debate. The Hong Kong Wine and Spirits Industry Coalition and lobbying partner the Association of Public-Safety Communications - who could be credited with ensuring duties were cut - were unavailable for comment. A source who asked not to be named said: 'They promised to put out a media statement by the end of March about how benefits of duty reduction would be passed to the customer, but it has yet to materialise.' The government expects to lose HK$350 million a year as a result of the tax cut, assuming static demand. The industry expects buyers to spend the same amount of money for better bottles, and perhaps a few new wine drinkers at the bottom end. What's already clear is that wine lovers who were buying and storing in London are now willing to bring their wines to Hong Kong. Crown Wine Cellars, a local operation with storage facilities in Shouson Hill, is already looking for additional sites. 'We had a few hundred cases of rare and fine wines waiting in London around the time of the announcement - that doubled within three days,' says general manager Greg De'eb. And Watson's Wine Cellars reports a set of new customers. 'They used to buy overseas, but are now happy to buy in Hong Kong,' says Jeanette Paterson, general manager of Watson's Wine Asia. There may be more cuts. Paragraph 70 of the Budget paper reads: 'Some people suggested that ... the duty on alcoholic beverages should be abolished ... I am willing to consider this innovative idea further if it enjoys broad community support'. It's an idea that Alan Ho, executive director of Florinda Hotels International, has been lobbying for in Macau for some time, where wine duty is about 20 per cent. But he has given up. 'I have received feedback from officials that they view a reduction in wine duty as encouraging alcohol consumption. It's a political stand on a community and moral issue for them. 'What I was hoping for in Macau would be much easier to achieve if wine duties in Hong Kong were abolished. The infrastructure in Hong Kong is so well developed it would be an ideal regional trading centre for wines.' Whether broad community support in Hong Kong might be similarly challenged on moral grounds remains to be seen, but there are already dissenting voices. Paterson worries that an abolition of duty could leave anybody free to import wine. She wants a flat tax, possibly in two tiers to stop low-end wine being penalised, and she's not alone. 'We could follow the Singapore model and charge, say, HK$30 per litre or bottle,' says Annette Pocklington, owner of Kedington Fine Wines. 'It would help to stop smuggling and the government wouldn't need so many staff in Customs and Excise.' De'eb says that politicians eventually 'will work out that it's probably costing more to collect the tax than what they receive'.