Revised tax - most consumers will benefit

THE letter in the South China Morning Post on March 30, commenting on the taxation of liquor and tobacco raises a number of issues, and has prompted me into responding, so far as the taxation of liquor is concerned.

Let me say this in defence of the new tax rates: (1) The confusing cocktail of taxation which has now been replaced went against the guidelines of the General Agreement on Tariffs and Trade (GATT). It seems that previous taxation smacked of social engineering rather than freedom of choice. For example,cheap table wine was taxed eight times higher than beer and five times higher than Japanese sake or Chinese type spirits. This, on a simple comparative basis, without taking strength into consideration.

(2) The new method is not presumably based on alcoholic strength. It was arrived at, quite simply, based purely on suppliers' or producers' transfer price.

(3) The new tax is not revenue generating - it is not expected to raise more tax for the Government's coffers.

With regard to the other points made: (1) Unlike the judiciary, customs is computerised - it is easy to calculate the new tax.

(2) There has always been plenty of strong liquor available at very cheap prices - Chinese type spirits often imported from Thailand have been widely available for those wishing to avail themselves of it.

Having said this, there are a couple of questions: (1) Why is beer and cider taxed at 30 per cent whereas wine is considered ''fair-play'' at 90 per cent? (2) Why are low strength spirits and cream liqueurs (under 30 per cent) considered worthy of less tax than standard strength spirits (30 per cent instead of 100 per cent)? Previous taxation based on fairly blatant social engineering (cheap beer and Chinese type liquor) has been replaced by a straight VAT duty on production costs.

The overall result should be a more affordable bottle of wine, vodka or brandy and a slightly more expensive bottle of beer, Japanese sake and Chinese type liquor.

Unfortunately first growth claret drinkers will have to pay more for their tipple, as will the X.O. brigade, but for the vast majority of consumers it is a much fairer system. And, lest we forget, moderate drinking is generally considered good for the health.

RICHARD PAINE Managing Director Fine Vintage (Far East) Limited