Hong Kong spirits tax break expected to revive whiskey market

This month, Hong Kong lowered its 100% tax on spirits to just 10% in a bid to boost tourism and generate revenue from the huge potential posed by high-value whiskey. But what does this mean for the whiskey industry as a whole? I contacted three people with different interests in the Hong Kong market to find out what they thought of the changes.

Untapped potential

The Asian whiskey market is estimated at $33.8 billion. Yet until last week, Hong Kong had one of the world’s highest tariff rates on high-proof alcohol. Any spirit above 30% ABV was subject to a 100% import tax. Although this measure was initially implemented to reduce the risks of excessive alcohol consumption, once the global popularity of whiskey began to emerge, it had unintended consequences on the ability to create and maintain a market National Whiskey.

East and South East Asia is an extremely important region for Scotch whisky. In its most recent annual report, the Scotch Whiskey Association said that “Asia-Pacific continued to dominate as the largest regional Scotch Whiskey market by value in 2023, supported record exports by value to China , a market up 165% compared to 2019, and the value increased in Singapore (19%) and Taiwan (8%). Although it is an important financial center in the region, the 100% tax meant that Hong Kong was disproportionately under-represented in these figures. This news should be a game-changer in the years to come.

How has the whiskey tax changed in Hong Kong?

In October 2024, the Chinese territory’s chief executive, John Lee, announced that the 100% tax on spirits over 30% ABV would be changed to a progressive system. Importantly, the 100% import tax remains on spirits up to HK$200 (approximately US$26) to discourage excessive alcohol consumption. However, for any part of the price exceeding HK$200, the tax rate drops to 10%.

Under the new system, if a HK$200 bottle is imported, the tax is also HK$200 and the sale price is HK$400 (about US$52), as before. If a bottle is imported at HK$500, the first HK$200 is taxed at 100% (HK$200), and the remaining HK$300 is taxed at 10% (HK$30), so the selling price is HK$730 (around $94). which represents a saving of HK$270 ($35) compared to the previous system.

Previously, for a HK$2,000 bottle, the total price would have been HK$4,000 ($510). It will now be HK$2,380 (a little over $300). You will notice that the savings disproportionately benefit high-value bottles and this is particularly important for the primary and secondary markets. The new system was implemented specifically to benefit from the luxurious and refined side of spirits, whether whiskey or baijiu.

A new whiskey hub for East Asia

I contacted Tom MacLaren, head of business development at specialist online auction house Whiskey Auctioneer, to ask his thoughts on the change: “The recent news regarding excise duties in Hong Kong is an important moment for whiskey lovers, both in the region and around the world. world-class whiskey venues and a highly engaged public, Hong Kong is poised to become even more influential in shaping whiskey culture and appreciation.

This is not the first time that Hong Kong has made the decision to cut taxes to stimulate a particular market. In 2008, they completely removed taxes on wine and Hong Kong has since become a world-famous wine trading hub, comparable to New York and London. The new tariffs bring whiskey in line with wine in the region, and while the changes will not only impact the whiskey market, it is exciting news for the entire industry.

“We consider this to be a hugely positive development: not only will it reduce barriers for a new generation of whiskey buyers, but it will also allow us to offer even greater value to our customers. Hong Kong and Asia by giving them access to the best whiskeys in the world. »

Easier access for collectors

Governments always have a fair balance to maintain when it comes to taxes on products like alcohol; too low and they risk encouraging poor health habits, but too high and people will find alternatives. The reality of the Hong Kong whiskey market is that many whiskey collectors won’t see much change in the prices they pay. He will however, allow them to obtain their favorite whiskeys more easily.

I contacted a buyer I know from the Hong Kong area to ask for their thoughts on the updates. They asked to remain anonymous, but shared an interested overview of the changes:

“Before, people shipped whiskeys to Taiwan, Singapore or Macau. Taxes in these places are only about 8-12% duties. And then the travelers would take them back to Hong Kong.

Ultimately, this means the new system won’t save local collectors much money. But that will make a big difference to official tax revenues, and that is what ultimately matters to governments. Unfortunately, my source also spoke of the impact already felt by local retailers: “they are already getting discounts of 15-20% to sell their old stock.”

Simulation for local destinations

Eventually, I contacted Diego Lanza, former head of spirits at Bonhams Hong Kong, who, after years of working with fine and rare whiskey in retail and auction, left to open his own whiskey bar in Hong Kong. Kong, OBE Whiskey. I asked him what impact he thought the changes would have on Hong Kong’s bar scene.

“This is fantastic news for Hong Kong’s bar scene. Reducing the liquor tax puts us on an equal footing with other major cities. Now bars and stores can now offer their selection of incredible whiskeys at more competitive prices. This will attract more whiskey lovers and perhaps create more whiskey lovers and collectors and help Hong Kong become a true hub for whiskey lovers.

So there you have it, three overviews of the tax changes in Hong Kong. It’s an exciting time for the spirits industry as a whole, as of course the changes don’t just impact whisky. From baijiu to bourbon and tequila to cognac, all high-proof spirits priced around $26 will benefit from these changes. I look forward to analyzing the impacts on the secondary whiskey market over the coming months.