4. There was a large increase in the smuggling of spirits of wine: 2,726 gallons were seized by Revenue Officers, and 16 gallons by the Police. The source of all was Macau. The use was continued of glass and stone-ware demijohns sunk in pairs on the bottom of the harbour, especially near Yaumati breakwater, but no evidence could be obtained as to who was responsible. This spirits of wine is chiefly used for blending purposes, and the purchaser of inferior spirit does not seem to care about the flavour provided the cost is low. A large proportion of the spirit legally imported from Macau is a blend of spirits of wine. There is undoubtedly a demand for inferior spirit at a cheap price and to meet such demand various devices have been resorted to by the trade. The coolie class, the chief consumers of such spirit, appear to be able to assimilate with impunity spirit which would seriously upset less strong stomachs. The question is under consideration as to how this demand can best be met, without detriment to the more discriminating drinker. One gallon of Java arrack costing wholesale about 70 cents makes on dilution about 4 gallons of spirit which can be readily sold, especially after a process of sophistication with cut lemons. Formosa arrack of rather inferior quality is sold at a considerably lower price. It is indeed competition with mixtures made from such contraband that drives many of the distilleries to commit frauds on the Revenue, ever.
5. The number of Chinese wine and spirit licences issued showed a decrease of 25. Part of the decrease was due to the refusal to renew the licences of shops which had been proved to be trading in smuggled spirit, and part was due to the general state of stagnation of business during the year. An officer was detailed during part of the year specially for the inspection of licensed spirit shops. He found that many shops were selling far more than they admitted or could satisfactorily account for, and that these suspect shops pretended to keep no books whatsoever. It became quite clear that until shops can be made to keep official books by regulation, as in fact they all do in practice though they refuse to produce them, no control can be exercised over the extensive trade in smuggled spirit. Common Chinese spirit is a kind of commodity both bulky and cheap, and therefore cannot stand heavy transport expenses. Yet it has been found that spirit will be sent from a retail shop in Cheung Sha Wan to a retail shop in Sai Ying Pun, or from Shaukiwan to Sham Shui Po. Spirit has been traced from shop to shop all over the Colony, where the cost of transport must have been nearly equal to the intrinsic value of the spirit, and the price quoted to the last receiver of a long chain remained the same.
The conclusion formed is that much of this aimless transfer which goes on is simply for the purpose of making the spirit lose its identity. The actual smuggling shop gets rid of its contraband at once to another allied shop which can, of course, plead purchase in good faith if questioned.