Revenue Proposals for 2002-03

73.     Nevertheless, in order to restore fiscal balance in the medium term, we need to increase revenue in addition to controlling the growth of government expenditure.

74.     Under present economic conditions, I consider it inappropriate to make any major changes on the revenue front in 2002-03.  My only tax increase proposal is a modest increase in the duty rate on wine.  I also propose to reduce the quantities of duty-free tobacco and still wine that local residents may bring back to Hong Kong.  These two proposals have no bearing on livelihood and will not hinder economic recovery.

Duty on Wine

75.     I propose to increase the duty rate on wine from 60% to 80%.  I estimate that this will generate additional revenue of $70 million in a full year.  This proposal will have only a mild effect on the retail prices of wine, as the level of duty is determined on the basis of ex-factory prices.  The new duty rate became effective at 2:30 p.m. today in accordance with a Public Revenue Protection Order signed by the Chief Executive and published in the Gazette.  We will introduce the related legislation into this Council as soon as possible.

Quantities of Duty-free Tobacco and Still Wine

76.     I propose to cut by 40% the quantities of duty-free tobacco that Hong Kong residents may bring back.  The new duty-free quantities will be 60 cigarettes or 15 cigars or 75 grammes of tobacco.  For duty-free still wine, the quantities that Hong Kong residents may bring back will be cut by 25%, from one litre to 750 millilitres, the standard size of a bottle of wine.  I estimate that this proposal will generate additional revenue of about $330 million in a full year.