ENG-2001 — Page 403

PUBLIC ORDER

Revenue Collection

The department is responsible for the collection of excise duties derived from dutiable commodities stipulated in the Dutiable Commodities Ordinance. These are alcoholic beverages, tobacco, hydrocarbon oil and other alcohol products (i.e. methyl alcohol and ethyl alcohol). During the year, the excise duties collected amounted to $6.94 billion, of which 54.6 per cent came from hydrocarbon oil, 34.3 per cent from tobacco, 11.1 per cent from alcoholic beverages and 0.03 per cent from other alcohol products, representing a decrease of 5.52 per cent over 2000.

The department also assesses the taxable values of motor vehicles under the Motor Vehicles (First Registration Tax) Ordinance for the purpose of levying first registration tax for motor vehicles. In 2001, the department registered a total of 99 motor traders and assessed the provisional taxable value on 60 241 vehicles.

Revenue Control

The dutiable commodities in Hong Kong are stored in warehouses licensed by the department after import or local manufacture. Removal of dutiable commodities is subject to a permit being issued by the department, and the commodities can only be released for local consumption upon payment of duty.

Currently, the warehouses operate under the physical supervision of the department. To introduce a more flexible business environment for the warehouse operators and to reduce the cost of control and compliance, the Government proposes to replace the physical supervision requirement by an open bond system, which is based on risk management strategies including stricter licensing criteria, random checking, documentary verification and post-transaction auditing. A pilot scheme was undertaken between January 1 and June 30, the results of which have demonstrated the feasibility of the open bond system. The system will be put to full operation after its legal framework is in place.

Revenue Protection

The department continued its vigorous enforcement action against cigarette smuggling in 2001. Contraband cigarettes are commonly smuggled into Hong Kong from the Mainland by cross-boundary goods vehicles or river trading vessels. During the year, about 340 million cigarettes were seized, an increase of 153 per cent compared with 2000.

With stepped-up enforcement action and enhanced intelligence exchange and co- operation with the Guangdong Customs, the smuggling of contraband cigarettes and illicit oil from the Mainland to Hong Kong was brought under control.

Marked oil (commonly known as 'red oil'), detreated marked oil and synthetic petrol continued to be used illegally as fuel for vehicles. To tackle the illicit fuel problem, apart from enforcement action taken at sea and land boundaries, sustained and continuous operations were mounted to eliminate illegal filling stations, illicit oil detreating plants and synthetic petrol manufactories. Surprise checks were also conducted to detect the use of illicit fuel in road vehicles.

As a measure to further suppress the illicit use of fuel, the Dutiable Commodities Ordinance was amended and came into operation on February 1, with a considerable extension of the scope of presumptions concerning illegal activities. Subject to specific exceptions, light diesel oil found in the fuel tank of a motor vehicle with a sulphur

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