Hong Kong’s liquor traders anticipate a drop in the retail prices of high-end spirits following the government’s decision to reduce duty on certain high-alcohol-content liquor. The policy, announced in Chief Executive John Lee Ka-chiu’s latest policy address, applies to spirits with an alcohol content exceeding 30% and an import price above HK$200 (US$26).
Under the new rules, the first HK$200 of the import price will still be taxed at 100%, but any amount beyond that will face a reduced duty of 10%. Spirits with an import price of HK$200 or less will remain subject to the full 100% duty.
The government collected over HK$700 million in liquor duties last year, according to official data. The tax reduction is aimed at bolstering the high-end spirits market and benefiting related sectors such as tourism and hospitality, though it has drawn criticism from health professionals.
Policy Aims to Stimulate Trade, While Addressing Public Health Concerns
Chief Executive John Lee emphasized that the tax cut affects only about 15% of the spirits market, striking a balance between promoting trade and safeguarding public health. He clarified that the policy does not encourage alcohol consumption, despite concerns raised by the medical sector.
“I understand how seriously our friends from the medical sector discourage people from drinking. I don’t encourage drinking either, and neither does our policy,” Lee said.
Industry Reactions: Benefits for High-End Spirits, Limited Impact on Lower-Priced Liquor
Henry Ho Yiu-hong, president of the Hong Kong Wine and Spirits Association, welcomed the move, particularly for high-priced spirits. He noted that the higher the import price, the greater the potential reduction in retail cost. However, he expressed disappointment that the tax cut does not extend to lower-priced liquor, limiting its overall impact on the local food and beverage industry.
“The tax cut will boost the high-end and specialty spirits market,” Ho explained, but added that lower-priced spirits would remain more expensive than in nearby regions like Macau and mainland China. Only spirits priced at or above HK$1,000 will see a significant reduction, making them more competitive.
Margaret Lam, owner of a whisky shop in Wan Chai, expressed frustration over the immediate implementation of the policy, which she said would lead to significant losses for her business. Lam had stocked up on inventory at the old tax rate, and now faces pressure to cut prices by 20-30%.
“They did not give us time to sell the goods,” Lam said, adding that she spends an average of HK$300,000 per month on spirits.
Public Response: Positive Reactions from Consumers
Consumers in Hong Kong, on the other hand, have reacted positively to the tax cut. Victor Tang, a trading professional, welcomed the change, saying he now plans to buy more liquor locally instead of traveling to Macau or duty-free shops to take advantage of lower prices.
“I used to buy liquor from duty-free stores because it was cheaper, but now with the duty reduction, I’ll buy from local stores,” Tang said, adding that he spends HK$3,000 to HK$5,000 on liquor each month.
Others, like aviation industry worker Rudolf Wong, echoed the sentiment, calling the policy a reasonable and beneficial measure for the economy. He believes it will boost the trade of high-end products without affecting more affordable spirits.
Health Experts Split on Policy’s Implications
The policy has sparked debate among health professionals. Former health minister Sophia Chan Siu-chee and lawmaker David Lam Tzit-yuen criticized the tax cut, emphasizing the health risks associated with alcohol consumption.
“Even if alcohol prices drop, our health does not change. Drinking too much can be very harmful to our bodies,” Lam warned.
However, some doctors on the Executive Council, such as Dr. Lam Ching-choi, supported the government’s decision. He described the policy as a “clever proposal” that would not significantly impact everyday drinking habits, while former health chief Ko Wing-man said the government had found a balance between public health and promoting trade.
Conclusion: Potential for Economic Growth Despite Health Concerns
While the liquor duty reduction is expected to stimulate the high-end spirits market and boost tourism and hospitality, it remains a divisive issue. With industry professionals anticipating benefits for high-priced spirits and consumers looking forward to lower retail prices, health experts remain concerned about the potential public health impact. The policy’s long-term effects on both trade and health will be closely watched.
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