Hong Kong lawmakers are advocating for the removal of the 100% spirits tax to transform the city into a regional hub for spirits consumption and trading, mirroring the success achieved with wine.
As a globally renowned free trade port, Hong Kong currrently imposes a 100% heavy tax on beverages with over 30% alcohol by volume, higher than neighboring Macau and mainland China. Consequently, Hong Kong’s spirits imports lag far behind on the city’s wine impports, which enjoy zero tariffs.
Ahead of Hong Kong Chief Executive’s policy address in October, Wong Ying-ho, a Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) member and Hong Kong legislator, has proposed abolishing spirits tax to enhance Hong Kong’s position in the spirits industry.
The proposal came after Chief Executive John Lee initiated consultations for his upcoming policy address. On July 17, the DAB proposed 195 recommendations across seven major areas, including the abolition of the spirits tax, aiming to attract more imported liquor business, trade, distribution, and auction activities to bolster Hong Kong’s status as a hub for the spirits trade in Asia.
Wong argued that currently, Hong Kong imposes a 100% duty on imported spirits with an alcohol content exceeding 30% by volume, whereas neighboring Macau and mainland China only imposes a 10% duty.
“If we can cancel this spirits tax in a fairly quick amount of time, we will be able to strengthen and elevate Hong Kong as a base for the auction and sale of imported alcohol.
“A lot of international alcohol merchants hope to enter the mainland market, so there will be a lot of alcohol storage, auction and sale,” he believes.
Macau imposes a 10% duty on imported spirits with over 30% alcohol by volume. Mainland China imposes the same 10% duty rate on brandy, whisky, baijiu, tequila, rum, and other spirits.
DAB Vice-Chairman Legislator Chow Ho-ding also stated that abolishing the spirits tax would promote spirits trade and reduce the overall tax burden on trade, which is significant to many foreign chambers of commerce focused on the alcoholic drinks trade.
Replicating Wine Success
The proposal is expected to launch the city’s spirits trade in a similar way as wine. Hong Kong abolished taxes on wine in 2008. Legislator Lee Ho-yin mentioned that after abolishing the wine duty, wine import value increased by 80% and 45% over two years, and wine sales volume grew by 54% within five years of the tax abolition.
“Since we cancelled the wine tax in 2008, Hong Kong has become one of the leading centres in the world for the auctioning and trading of wine,” lawmaker Dominic Lee Tsz-king said. “We think if we adjust our spirits tax, we will have the same effect and it will allow Hong Kong to become an international auction and trading centre for spirits.”
As an Asian wine hub, Hong Kong, with a population of just 7.4 million, imported approximately US$972 million worth of wine in 2023. Mainland China, with a population of 1.4 billion, imported about US$1.16 billion in 2023.
However, Hong Kong’s spirits imports lag far behind mainland China. In 2023, the city imported US$395 million worth of brandy and whisky, whereas the mainland’s imports more than five times of the value to reach US$2.336 billion, in part largely due to the hefty import taxes imposed on spirits.
Additionally, Election Committee Legislative Council member Lee Ho-yin believes that Hong Kong’s alcohol tax revenue is minimal, amounting to only HKD 700 million, or 0.156% of the government’s total revenue, insufficient to alleviate the fiscal deficit.
On the contrary, reducing spirits tax could release profits in the spirits industry, indirectly increasing revenues from profits tax and income tax. Additionally, the mainland market’s recognition of imported beverages with over 30% alcohol is low, and Hong Kong could leverage this to become a mediator. Chinese baijiu, like Moutai, has low recognition among overseas consumers, limited to Chinese communities, and there is hope for Hong Kong to become an international trade center for Chinese baijiu, enhancing global awareness, he believes.
However, this is not the first time Hong Kong politicians have called for spirits tax reform. During this year’s Budget consultation period, the DAB suggested lowering the spirits tax from the current 100% to 10%, but it was not adopted.
Whether this new proposal will be adopted remains to be seen, and Vino Joy News will continue to follow the developments.
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