Hong Kong eliminates duties on alcohol

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HONG KONG, Feb. 27 – Hong Kong eliminated the duty on imported wines today, creating cheer amongst much of the population relishing a return to the past as an Asian wine lover’s paradise.

In his annual budget speech, Financial Secretary John Tsang announced that the duty on alcohol would be eliminated, the cuts to take place immediately. The duty had been 40 percent.

As the duty on alcohol is paid on the wholesale cost of wine, Jeanette Paterson, general manager at Watson’s Wine Asia, Hong Kong’s largest wine supplier, said consumers would actually pay around 22 percent less in shops and bars. “We will be phasing our price cuts in three stages so that by next week, all shops will be selling wine at the new prices,” Paterson said. The deal is good for consumers but not for suppliers, she said, who will now feel compelled to sell off stock on which they had already paid 80 percent duty at a discount.

Tsang is expecting this to create a wine trading and distribution market in Hong Kong. “It is expected that by developing the various businesses in Hong Kong relating to quality table wine, our total business volume in trading, storage and auction of table wine may increase by as much as 4 billion dollars,” he said in his maiden budget speech. The government will also remove related administrative controls to facilitate the import, export and storage of alcoholic beverages, he said. Forgoing the duty on alcoholic beverages will cost the government about 560 million Hong Kong dollars a year.

Don St.Pierre, of ASC Wines, Mainland China’s largest wine distributor, commented this afternoon that ASC would be fast tracking the opening of an office in Hong Kong, and expected the territory’s wine drinking to boom, especially at the premium end of the market. He did express concerns over possible problems with the smuggling of wines from Hong Kong into the mainland, and told China Briefing he would be leading a consortium of mainland wine distributors to the Chinese government to lobby for a similar reduction in wine duties in the PRC.

6 Responses

  • David says:

    I thought that mainland China had a lower local duty on wines than HK. Wouldn’t the smugging have been the other way around for consumption of wines? HK has 0% import duty on wines but levies a high local duty on the sale of Tobacco and alcoholic beverages. Therefore in the past smuggling from HK into mainland China was quite common. That’s why your HK imported beers and other beverages have HKDNP on it. Shows it is imported from HK or maybe smuggled. They did this so these beers could not be sold illegally into the local HK market.

    Am I wrong?

  • Chris Devonshire-Ellis says:

    The import tariff on the mainland for wine is 48.2%, made up of Customs duty, VAT and Consumption tax. Thats a rather large incentive to smuggle it in from HK. Ever crossed the border in a car at Lok Ma Chau into Shenzhen recently ? They never check your car – it could have six cases of wine in it…

  • Tom says:

    I don’t think having an HKDNP sticker on the bottle will deter people in Shenzhen from drinking it if it’s 40% cheaper as a result do you ?

  • David says:

    Start bringing in the cheap booze from HK then. 48,2% is no joke indeed.

    For Tom: The HKDNP is for HK. That way it is easy for the customs in HK to seize products that were supposed to have been exported from HK but by the hand of Bacchus found their way to the bars of Mong Kok. In China it will have the HKDNP on it of coming from HK and once smuggled it is hard to distinguish what wine had their duty paid or not.

    I remember a boat was seized once on its way to the South of China towing a giant rubber condom filled with bottles of booze. That worked so well that they later even towed whole cars that way. This was during the days cars still had 100% import duty on them. Stolen in HK, new dashboard and steering wheel left and presto! tons of money to be made. Chris will probably know a couple of more of these smuggling cases from the good old days. The smugglers were pretty clever. Smuggling of diesel was also a big hit, that business is still going strong but Diesel versus wine….I go for a bottle of claret.

  • Chris Devonshire-Ellis says:

    The “smuggling cars in giant condoms” underwater, towed behind boats was the way in which Jimmy Lai (now on the run in Vancouver) conducted most of his smuggling in Xiamen. In Shenzhen, years ago, it was so rife that the taxis on the streets openly sometimes were stolen Hong Kong Toyotas (noticable because of the Right Hand drive) and stolen 400cc and above motorbikes from Japan. (you couldn’t get bikes in China higher than that at the time). They even used to advertise them in bars for sale! A few Harleys were doing the rounds too. Ahhh yes…the good old, bad old days.

  • Kamila says:

    I find it rather disturbing that nobody has even mentioned the negative health impact of lowering the cost of alcohol. I refer specifically to the case of Mauritius which heavily reduced import taxes in 1994 due to pressure from its primary industry – tourism. By 1995 admission to psychiatric hospitals due to alcoholism had doubled (from 1993), by 1996 death rates due to liver disease and cirrhosis had increased by 30%, and by 1997 arrests for alcohol-associated traffic accidents had increased by 23% (Disease Control Priorities Project, WHO). By 1997 the government was calling for alcohol control measures; by the 1999-2000 budget alcohol taxes had increased.

    Such outcomes place a huge burden not only on the people who suffer but also on the health system – 560mill HK dollars per year is not the only thing the government is foregoing. I’d love to know if the government considered this when it made its decision.

    Does anyone know if such health outcomes research is being/will be conducted?? thanks

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