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The budget has significance in that not only the waiver
will help improve wine consumption, the government's thumbs down to the
spirits lobby for the elimination of import taxes, signifies government
focus on the benefits of wine as a health beverage and to help reduce
the alcohol consumption.
The duty
cuts, which have come into immediate effect, were announced during
the maiden budget speech of the finance secretary John Tsang. A major
factor of motivation is also to create a wine trading and distribution
centre in the country, according to press sources.
Last year the duties were reduced
from 80% to 40% following high-level representations over many years by
wine-exporting countries, and had the support of the Hong Kong hospitality
and tourism industry.
In a related move, the secretary also announced the
elimination of the Hotel Administration Tax, HAT of 3% to encourage the
tourism industry.
European Spirits Organisation (CEPS) has expressed its
disappointment and claims that leaving out spirits from the exemption
was fairly unique. A statement by the Director General, Jamie Fortescue
says the organisation sees no reason for the government to exclude spirits
from the focus and would look to resume lobbying over the matter.
Withdrawing the duty on wine and beer is expected to
cost the government treasury about HK$560m ($72m) a year, according to
official figures in the speech.
Despite the CEPS' complaints, the spirits industry has enjoyed relative
success in recent times through campaigning to reduce the level of customs
charges for their products in Asia, including India.
Last month, the EU said it would open dialogue with WTO over its concerns
regarding custom duty in Thailand. The CEPS alleges that the customs authorities
in the country began rejecting tariff values set by the importers since
September 2006 and started taking higher estimates for calculations arbitrarily.
Such approach to calculating custom duty, which establishes tax and duty
value on imported products, is a breach of the WTO Customs Valuation Agreement,
according to the CEPS.
DelWine has written enough about their recent victory in India last July
through the pressure from EU and the US, with the withdrawal of additional
duties (ACD) on wine and spirits.
The budget announcement in Hong Kong of waiving off duties on wine and
leaving them untouched for spirits, is in sharp contrast with Maharashtra
excise policy which slapped and additional 200% state duty on wines, reducing
the same from 150% to 75% on spirits, giving rise to speculation that
the spirits lobby had made an offer that the state government could not
refuse.
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