An overhaul of China’s tax regime should boost the bottom line of the country’s spirits producers thanks to a cut in the consumption tax normally levied on hard alcohol.

The tax reform announced these days will lower consumption tax on spirits from 25 per cent to 20 per cent although the market was still unsure about how much impact the change could have.
The London-based spirits group Diageo, which imports all of its products from the UK, is still investigating whether the tax reform, set to take effect on 1 April, applies to foreign brands.

A company spokesman said: “We are still talking to the ministry of finance about whether this will be applied to foreign spirits. We're pretty sure that it will, but taxation is very complex. The new policy only referred to Chinese white alcohol.”

He added that Diageo currently pays import tariffs on its range of products as well as the consumption and other taxes.

Qiao Baijun, food and beverage analyst at CITIC Securities, was also dubious about the real impact of the reform. He told AP-FoodTechnology.com that many local producers do not pay the full 25 per cent consumption tax.

“The actual tax is somewhere between 10-15 per cent,” he said.

Other products set to benefit from the tax changes include skincare products and shampoo, for which consumption tax will be entirely removed. However disposable wooden chopsticks as well as wooden floor panels and luxury items like watches and golf balls will now be taxed.