Luxury Tax Cuts Or Threaten Hongkong'S Retail Industry

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As a world renowned shopping paradise, Hongkong's luxury retail industry is mainly dependent on tourists. The latest data released by Bloomberg show that the correlation between Hongkong retail sales and total number of tourists to Hong Kong climbed to 0.72 in April, the highest point since September 1988.

The reading number is 1, indicating that these two indicators follow each other step by step. Zero reading indicates that there is no correlation between the two indicators.

Chinese tourists are also the main force in Hong Kong's consumption.

According to Credit Suisse statistics, the proportion of mainland Chinese tourists last year accounted for 43% and 70% of Hongkong's total retail sales and tourist expenditure respectively.

Chinese tourists who arrived in Hong Kong last year jumped 26% to 22 million 700 thousand, and the total number of arrivals rose to a record high of 36 million.

Meanwhile, in the past five years, the appreciation of RMB to HK $23% has greatly increased the attractiveness of shopping in Hong Kong.

"Lowering the tariffs on luxury goods will strike a blow for the luxury retail industry in Hongkong," said Joseph Lau, a Hong Kong economist at the Bank of Hong Kong. "It will crack down on the tourism expenditure of Chinese mainland tourists on luxury goods and durable goods."

Wang Yayuan, joint director of Shenyang Wanguo Securities Hongkong, also said that for domestic people, the most convenient place for overseas consumption is Hongkong.

The reduction of import tariffs on luxury goods will make consumers who are accustomed to buying famous brands abroad stay in the mainland to stimulate domestic demand, but will damage Hongkong's retail industry.

The relatively low price abroad is the main reason to promote luxury consumption.

Gao Peiyong, deputy director of the finance and Trade Institute of the Chinese Academy of Social Sciences, recently pointed out that higher taxes cause the upside down of domestic and foreign product prices.

At present, the import tariffs of luxury goods are generally 15% to 25%, and there are value-added tax, business tax and consumption tax in the sales process.

This makes the price of domestic luxury goods generally at least 1/3 higher than that of origin.

According to the Ministry of Commerce survey data, 20 brands of high-end consumer goods, such as watches, bags, clothing, wine and electronic products, are clearly priced at home and abroad: the domestic market is about 45% higher than that of Hongkong, 51% higher than that of the United States, and 72% higher than France's five products.

Despite the rapid growth of luxury consumption in China in recent years, the proportion is still less than 50%.

According to the 2011 global market report released by the World Luxury Association, as of the end of March this year, the total consumption of China's luxury goods market has reached US $10 billion 700 million (excluding private aircraft, yachts and luxury cars), occupying 1/4 of the global share. China has become the second largest luxury consumer in the world.

The association also predicts that China's luxury goods market will reach more than 14 billion 600 million dollars in 2012, occupying the pinnacle of global luxury consumption.

On the other hand, there are obvious differences between the two ministries and commissions of the Ministry of Commerce and the Ministry of Finance on the adjustment of luxuries tariffs. On the one hand, the Ministry of Commerce has repeatedly said that reducing the import tariffs of luxury goods is the general trend. On the other hand, the Ministry of Finance quoted the viewpoint of Liu HSI HSI, deputy director of the Financial Science Research Institute of the Ministry of Finance: "to levy taxes on imported luxury goods, that is, to levy taxes on the rich, is undoubtedly conducive to social equity, not only should not be reduced, but the reaction will be improved."