Reform Spirits Tax to Grow Hong Kong’s Economy and Competitiveness

On behalf of the European Chamber of Commerce’s Wine & Spirits Business Council (WSBC), we are delighted to share with you the findings of a recent academic study2 led by Professor Waiman Cheung, Business School, the Chinese University of Hong Kong (CUHK).

Professor Cheung’s study suggests that a reform of spirits tax system – replacing current 100% ad valorem tax on liquor above 30% alcohol by volume, with specific tax of around HKD 75 per litre of pure alcohol – could boost the local economy by HKD $1 billion, create around 1,000 full-time jobs and, most importantly, strengthen Hong Kong’s position as a premium tourist destination, providing further impetus for growth.

We believe the proposed reform could be part of the Government’s measures to help the businesses, in particular SMEs, in time when the economies of Hong Kong, the Mainland and the world are likely to face headwinds over the next 12 to 18 months.

Therefore, in this submission, we recommend the Government to:
Reform the current outdated spirits tax regime and align it with international practice;

Replace the current 100% ad valorem tax on liquor above 30% alcohol by volume, with a more equitable specific tax; and

Set a reasonable level of specific taxation, at about HK$75 per litre of pure alcohol, on all alcoholic products above 30% alcohol by volume.

The proposed spirits tax reform will be a supportive move to enhance Hong Kong’s competitiveness and vibrancy of the food and beverage (F&B), entertainment, tourism, and spirits auction businesses, and unleash the untapped economic growth potential. More importantly, the changes will benefit the wider public due to the increased employment and the job opportunities, as indicated in the academic study conducted by Professor Waiman Cheung and his team.

 

The Paper:
WSBC-Position-Paper-January-2019_Spirit-Tax-Reform-to-Grow-HK-Economy.