Crippling duty on alcohol threatens HK tourism image

HEAVY taxes on alcohol are crippling sales and threatening Hong Kong's image as a tourist destination, with the Government being the biggest loser, liquor importers and industry representatives warn.

Sales of imported spirits in Hong Kong dropped by about 10.5 per cent last year, causing a net fall in the total tax revenue, according to the chairman of the Liquor and Provision Importers Association, Claes Rydberg.

''This means the Government is losing, the consumer is losing and we are losing. That cannot be right.'' Mr Rydberg said the association had on many occasions requested that the Government carry out a complete overhaul of the alcohol duties system, but had so far had no concrete response.

He said the two-tier system, where tax on Chinese spirits was many times lower than that on other imported alcohol, was not only unfair but could also be against the guidelines laid down by the General Agreement on Tariffs and Trade.

At present, the Government imposes a duty of $80 on every litre of spirits, plus an additional 35 per cent on the value of the drink. Chinese spirits are taxed at about nine per cent.

Imported wine is taxed at $34 a litre plus 20 per cent, with sparkling wine harder hit at $49 and 35 per cent.

Which means that, before it has even had importer and retailer margins, a bottle of table wine worth $30 in Australia or France would have to sell for at least $61.50 in Hong Kong.

Ordinary sparkling wine worth $40 would have to sell for at least $103.

Those amounts are expected to go up by at least 10 per cent if the Budget speech on Wednesday follows the pattern set over the past three years.

''What we are pushing for is for a complete change in the liquor duty so it is based on alcohol content, and not on a notion of value,'' Mr Rydberg said.

A spokesman for the Hong Kong Tourist Association said any reduction in tax on wine and spirits would be ''very welcome''.

She said that high alcohol duties were undoubtedly having a significant effect on tourist spending, now worth about $50 billion a year and the second biggest source of foreign income after garments and textiles.

About $6 billion were spent by tourists on meals outside hotels, with an additional, unquantified amount spent in hotel restaurants.

She said that although a record 7.2 million international visitors, plus 1.7 million from China, arrived in the territory last year, alcohol prices were contributing to a general idea that Hong Kong is an expensive place.

''Entertainment, nightlife and food and beverage are some of the biggest reasons for people to come to Hong Kong,'' she said.

Senior manager for the Convention Bureau of the Tourist Association, Ellen Kwan Gee-hing, said there had been some complaints by business people visiting the territory for conventions and exhibitions that buying a drink in Hong Kong was too expensive.

''Some people, especially from Australia and New Zealand, have said that their drinks bill really pushes up their budget for the event.'' She said about 260,000 people visited Hong Kong last year for conventions, spending on average $24,000 per person - about three times the average amount spent by other visitors.

A Finance Department spokesman would not comment on the alcohol levies, nor whether there were any plans to change them, saying only that any changes would be announced at next week's Budget speech.