TNAG-1641-FCO40-2288-Budget-of-Hong-Kong-1987 — Page 55

112.

I also propose to increase the duty rate on cigars from

$210 to $220 a kilogram, and that on manufactured tobacco (other

varieties) from $190 to $200 a kilogram. This will keep them in line respectively with those on imported manufactured cigarettes

and imported unmanufactured tobacco. Finally, I propose to

revalue the duty on Chinese prepared tobacco in line witn

inflation since 1985 when it was last revised, by increasing it

from $40 to $43 a kilogram. I estimate the additional revenue

yield from the two proposals to be $8 million in 1987-88.

113.

into

All the duty proposals on imported

imported tobacco come

effect this afternoon and

and should generate a total additional revenue yield of $55 million in 1987-88.

114.

In 1985, my predecessor mentioned the option of

imposing an ad valorem duty on tobacco (41). The trade was

subsequently consulted and their response was far from

unanimous (42). The existing duty structure with its consequent payment and drawback requirements is, however, less than ideal, particularly in relation to cigarettes. It is cumbersome and

costly to administer. It also imposes costs on local manufacturers, who have to tie up working capital in pre-paid

duty that can only be reclaimed on the export of finished

products. The differential in duty rates for imported and

locally manufactured products is open to charges of

protectionism although the present differential of around 10% is

fully within our rights and obligations under the General

Agreement on Tariffs and Trade.

115.

In the light of these factors it is my present

intention to move

in due course to a simpler duty structure in

which duties

duties would be levied on numbers of cigarettes rather than on weight of tobacco. This would entail the levying of

duty only on manufactured cigarettes

cigarettes destined for the local

(41)

1985 Budget Speech, paragraph 118.

(42) 1986 Budget Speech, paragraph 102.

/market

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