China wrestles with major duty hike

28 August, 2009

The 2009 International Wine & Spirits forum has opened in Shanghai, weeks after a big government tax hike was introduced which threatens to derail spirits sales in China.

The State Administration for Taxation, which levies a flat rate of tax on all spirits, also applies a second tier of duty based on the drink’s retail price. Until August, this stood at 20%, but has now been raised by between 50% and 70% as part of efforts to curb alcohol misuse.

Producers are now debating whether to absorb the increases, or to pass them on to consumers and risk losing sales and market share. The issue is likely to be a hot topic at the Shanghai forum, which got under way on August 28 and is expected to attract 100 international traders and retailers.

According to a report in the Beijing Review, producers of premium white spirits are passing through some of the increases but lower-end rivals are not following suit, leaving supermarket prices largely unchanged.

Nielsen reports that in the first four months of 2009, domestic white spirit sales in Chinese supermarkets surged by almost 16%, while imported spirits saw declines.

Chinese white spirits producers are attracting growing interest from foreign investors, thanks to rising sales and predictions of a 21% increase in sales revenue between 2009 and 2012.

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