On October 16, Hong Kong Chief Executive John Lee announced in his policy address that he would reduce the tax rate on some spirits, sparking heated discussions from all walks of life. The move is intended to revive Hong Kong's "night life" and help the local economy, which has been slow to recover after the epidemic and the implementation of the Hong Kong National Security Law. However, many industry insiders have questioned the actual effect of the policy, and the medical community is also worried about the possible adverse effects on public health.

For a long time, Hong Kong has imposed a 100% tax rate on spirits with an alcohol content of more than 30%, which is one of the highest in the world. This reform introduces a two-tier tax system: a 100% tax rate is maintained for spirits with an import price of less than HK$200 (about US$26), while the tax rate for the part above HK$200 is reduced to 10%. This is not the first time that the Hong Kong government has stimulated alcohol consumption by reducing taxes. In 2008, Hong Kong abolished the wine tax, successfully attracted a large number of imports, and established its status as a duty-free port in Asia. However, whether this tax reduction can boost the "night economy" as expected remains to be seen.

Industry reaction: limited tax reduction effect, expectations dashed

The liquor industry has a complex attitude towards this tax reduction policy. As early as the beginning of this year, several legislators and industry representatives suggested that the government reduce the tax on spirits to revitalize the night economy. Su Youping, founding president of the Hong Kong Wine Merchants Association, once proposed to reduce the tax on spirits to 20%, hoping to be close to the 10% liquor tax level in Macau. However, the government eventually chose a two-tier tax system, and only targeted spirits with an import price of more than HK$200, which dashed the industry's expectations.

Wen Derong, general manager of Weicheng Foreign Wine, which has 23 stores in Hong Kong, said that many imported wines are priced below HK$200, and these spirits do not enjoy tax rate concessions. According to his estimate, about 85% of the spirits on the market are imported at a price below HK$200, so the types and quantities of spirits that the policy actually benefits are very limited. In addition, even if the higher-priced spirits enjoy tax reduction benefits, the final price will not have a significant impact on consumers due to the wholesale and retail markups in the middle. This means that high-end consumer groups may be the main beneficiaries of the tax cut policy, while the cost of mass consumer groups has remained almost unchanged.

Dilemma of the bar industry: Tax cuts cannot solve the fundamental problem

The epidemic has severely impacted Hong Kong's bar and catering industry, and many bars have not yet fully recovered. Qian Junyong, chairman of the Hong Kong Bar Industry Association, described the industry as being in "dire straits". He believes that although the tax cut policy is a positive step, the actual help to the bar industry is minimal. Lin Yi (pseudonym), who owns a bar, pointed out that among the current operating costs of bars in Hong Kong, the cost of alcohol is not the largest expenditure, but rent and labor are the heaviest burden. Even if the tax rate is reduced, the amount saved is insignificant compared to other expenses such as rent and labor.

Lin Yi explained that the monthly rent for opening a bar in Hong Kong is tens of thousands of Hong Kong dollars, plus the cost of alcohol and employee salaries, the monthly expenditure often exceeds 200,000 Hong Kong dollars. Even if the cost drops slightly after the tax cut, the operating pressure of the bar is still huge, and it is impossible to fundamentally alleviate the operating difficulties. He pointed out that the attractiveness of nightlife depends not only on the price of alcohol, but also on the improvement of the overall atmosphere, and Hong Kong is still lacking in competitiveness in this regard.

Changes in bar culture: high-end consumption is still the mainstream

In terms of business strategy, many bar owners choose to take the high-end route to cater to the needs of specific consumer groups. Lin Yi's bar features high-quality cocktails and is positioned to provide a high-quality drinking experience rather than quantitative consumption. He pointed out that although tax cuts can reduce the cost of high-priced spirits to a certain extent, the impact is not significant because customers who consume high-end spirits themselves are not sensitive to price changes. He believes that the current challenge of Hong Kong's night economy is to attract people to go out and consume, rather than simply reducing the price of alcohol.

Moses is a senior bartender who currently works in a high-end bar in Soho. He believes that although tax cuts are a good thing for the bar industry, the impact is limited in the long run because the key to restoring nightlife lies in improving the overall consumption atmosphere rather than a single price adjustment. He pointed out that the structure of Hong Kong's nightlife has changed, and many consumers choose to go north to Shenzhen for consumption, or even travel abroad, and Hong Kong's local nightlife is not as attractive as before.

Medical community’s doubts: Tax cuts conflict with public health

The medical community strongly opposes the tax cut policy, believing that it may have a negative impact on public health. Cheng Zhuoduan, former assistant director of the Department of Health, wrote in the media that alcohol consumption is closely related to social problems such as traffic accidents and violent behavior. Tax cuts may lead to increased drinking, which in turn brings health risks. Research from the School of Public Health of the University of Hong Kong shows that thousands of people are hospitalized for alcohol-related diseases every year, and tax cuts may increase drinking, which in turn brings more health problems.

Professor Wang Wenbing of the School of Nursing of the University of Hong Kong also pointed out that alcohol is a first-class carcinogen. On the one hand, the government implements a tobacco control policy, while on the other hand, it relaxes the tax on spirits, which is a policy contradiction. Professor Wang believes that the government’s move lacks public health considerations and may have a negative impact on the overall health of society.

Can the night economy be revived? Efforts from all parties still need to be strengthened

In recent years, the Hong Kong Special Administrative Region Government has vigorously promoted nightlife projects in order to stimulate nighttime consumption, but the actual effect is not significant. Bar operator Lin Yi said that the charm of Hong Kong’s nightlife is no longer as good as before. He recalled the nightlife before the epidemic, when Hong Kong had a rich variety of restaurants and bars, attracting a large number of tourists and local consumers. However, with the epidemic and the implementation of the Hong Kong National Security Law, many consumer groups have been lost, and the atmosphere of the night economy has gradually declined.

Lin Yi believes that tax cuts alone cannot revive the night economy, and the government needs to make more efforts in overall planning, including improving public facilities, enhancing the atmosphere of nightlife areas, and enriching night activities. Moses also mentioned that during the long holiday in China, the bar where he worked did welcome a wave of tourists, but many other bars were still sparsely populated. The key to enhancing the attractiveness of the night economy is to provide a rich consumer experience rather than a single price adjustment.

Future policy direction and public discussion

At present, industry insiders in Hong Kong expect the government to take more steps in tax cuts, and even launch a "second round" of tax cuts to increase support for bars and catering industries. However, the public health risks of tax cuts remain the focus of discussion, and the opposition voices in the medical community are also worthy of attention.

Looking back at the prosperity after the abolition of the red wine tax in 2008, the Hong Kong government's move to adjust the tax rate on spirits is obviously hoping to replicate its success. However, the economic environment in Hong Kong today is different from that time. Consumer habits, travel choices and the global economic situation are all changing. In the future, whether Hong Kong's nightlife can be revived again requires cooperation and innovation from multiple parties.