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SCMP Reporter

TAXES on alcohol are discriminatory and contrary to the principles of the General Agreement on Tariffs and Trade (GATT), the chief professional body for the drink importation trade has claimed.

  Drinks importers are hoping for a change to the local system in Wednesday's Budget. But after years of being ignored, they are not hopeful.

    Hong Kong duty discriminates in favour of Chinese spirits which are charged duty at a fraction the rate of other spirits, such as brandy and whisky, according to figures from the Liquor and Provisions Importers Association.

  The duty also penalises some products far more heavily than others.

  The association is also warning that if duty is raised in this year's Budget, then revenue will fall.

  ''Since 1990, the volume of imported spirits on which tax and duty was paid has declined by 28.7 per cent,'' said Claes Rydberg, chairman of the association.

  ''And in the 12 months to November last year, it dropped by 10.5 per cent,'' he said.

   Hong Kong charges both a flat-rate specific duty, which varies according to the class of drink sold, and also a value-added tax which ranges from 35 per cent of landed cost for imported spirits or champagne and sparkling wine to 20 per cent on wine and fortified wine. Cider and beer have only the specific duties to pay.

  The tax on value levies a tax on both shipping costs and production costs.

  The specific duty runs at $80 per litre of spirits, like to brandy, to $49 per litre for champagne and $34 per litre for wine.

  This method of taxation taxes cheaper wines far more highly than it does expensive spirits in terms of tax-per-dollar cost.

  During the week in which Governor Chris Patten returned from Australia after describing its wine as a ''contribution to civilisation'', Walter Gerrard of drinks importer Hiram Walker said: ''I was in Australia recently. It made me weep. There were bottles of wine on the supermarket shelves for less than the cost of duty in Hong Kong.''   One argument says that pricey drinks like XO cognac or fine wines from major growing regions, especially chateau-bottled French wine, do not suffer from high taxes in the way in which budget wines do.

  Australian wines which cost about GBP3 (about HK$34) on British supermarket shelves, cost $80 and above in Hong Kong. The more expensive bottles are expected to be pricey and gain cache because of it: cheaper wines, even if they make good drinking, suffer by comparison.

    The drinks trade has lobbied the Government for years to change the system without effect, but now the importers' association and other bodies are thinking of getting tough.

  ''The Hong Kong system is not consistent with GATT,'' said Mr Rydberg. ''We might consider representations on that basis.''   Another body which is considering a complaint is the Australian Wine Appreciation Society of Hong Kong (AWASH). Described by one locally-based Australian as a group divided into people who did drinking seriously and people who drank seriously, the organisation sees itself as having mainly an educational role.

  But Susie Ledger, a society spokesman, said the group would consider complaining to the Australian Trade Commission as part of a group complaint about the tax.

  ''If other organisations and importers were complaining, we would support that,'' she said.

  The importers' association is particularly irked by the way in which duty on Chinese spirits is charged at a much lower level: it believes that the decline in brandy sales can be partly blamed on this factor.

  According to the association's figures, duty on Chinese spirits works out at $8.99 a litre, equivalent to a duty of $22.48 a litre of pure alcohol. The actual tax per litre of brandy is $142.84, it claims. That would give a tax per litre of pure alcohol of $357.10.

  Champagne suffers even more. While Europe has enjoyed an unprecedented champagne boom following a decision by the growers body to slash prices, Hong Kong residents pay in taxes the equivalent of $755.20 per litre of pure alcohol.

    ''That alone makes Hong Kong a hardship posting,'' said one expatriate business leader.



Liquor tax anti-GATT, says group