Hong Kong slashes spirits tax

The Hong Kong government has cut duty on spirits, one of the highest rates in the world, to boost the on-trade, the country’s leader has announced.

John Lee, chief executive of Hong Kong, announced a significant tax cut on spirits (30% ABV and above) in his policy address yesterday (16 October).

Under a new two-tier system, the duty for spirits with an import price of HK$200 (US$26) and above will be reduced from 100% to 10%, while products at HK$200 or below will remain at 100%.

The new duty rates, which are effective immediately, will only be applied to products up to one litre in size. If a larger container is used, the tax will be calculated on a value per litre basis.

Last month, it was reported that Hong Kong was planning to lower the amount of tax it levies on spirits, as the financial hub hoped to regain its edge as a ‘premier destination’ for nightlife.

A government spokesman said: “Hong Kong has been adopting a simple ad valorem duty system on liquor since 1994. Given the experience in waiving wine duty in 2008, a reduction of liquor duty should similarly promote high-end liquor trade, thereby giving impetus to the development of other high value-added sectors such as logistics and storage, tourism as well as high-end food and beverage consumption, creating more job opportunities and bringing overall benefits to society.

“With the introduction of a two-tier system with different duty rates based on value, we believe that the proposal has struck a balance between facilitating the liquor business and guarding public health against binge drinking as a result of the reduction in liquor duty.”

The move could also help to boost the profits of struggling major players such as Hennessy owner LVMH and Pernod Ricard, which recently saw first-quarter sales plunge by 26% in China.