Decanter broke the story on Friday that Macau, the world's largest gambling center, has eliminated its 15% import duty on wine (see "Macau scraps wine tax") effective August 26, 2008. Such a move seemed inevitable after Hong Kong's identical decision earlier in the year for several reasons:
- Very little Macau tax revenue is lost as its 15% rate was already relatively low and the market is smaller than Hong Kong's.
- Strategically, Macau's gaming and hospitality business is far more important to its economic future than wine tax revenue and this move further supports that growth.
- Macau's alcohol-related businesses had been negatively impacted (down 30%) by Hong Kong's move (see story).
Implications for Hong Kong
I don't think Hong Kong officials will see Macau's decision as a bid to compete with their own initiatives to be the leading fine wine hub in the region. On the contrary, it makes Hong Kong even more attractive. Here's why:
- The Macau gaming and hospitality industry is close enough to Hong Kong that it can be adequately serviced from Hong Kong (now without any obstacles in the way).
- The larger "tax-free" market opportunity increases attention on the region's potential as a fine wine hub which ultimately benefits Hong Kong over Macau as it's more established as an international business center.
Will China follow?
How long will it be before mainland China's wine import duties are reformed? Don't hold your breath but the stark difference (0% vs. about 50%) can only help create pressure to bring duties lower (even if only for higher-priced fine wine while perhaps leaving existing duties in place on other wine to protect the development of the domestic Chinese wine industry).
