BIZCHINA / New Consumption Tax
'Luxury tax' to benefit HK watches
(Reuters)
Updated: 2006-03-30 10:28
Hong Kong sees China's planned 20 percent sales tax on luxury watches as
an opportunity, as Chinese consumers switch from buying expensive foreign
timepieces to similar cheaper Hong Kong brands.
Rapid economic growth in the world's most populous nation has created a
fast-swelling middle class with a taste for luxury goods, but the
consumption tax would probably curtail sales of expensive watches.
"We see this as an opportunity for Hong Kong," said Raymond Yip, an
executive of the Hong Kong Trade Development Council, at "Baselworld",
the world's largest watch and jewellery fair.
As many as 333 Hong Kong exhibitors are showcasing their watches and
jewels alongside their Swiss rivals at the fair, which takes place from
March 30-April 6 in the Swiss border town of Basel.
Hong Kong's exports of watches and clocks were valued over $5.9 billion
last year. The largest export items were wrist watches, accounting for
two thirds of watch exports.
Hong Kong is known for its fashion, digital and sports watches in the
medium price segment.
A trade agreement with the Chinese mainland already exempts Hong Kong
from a 23 percent import tax, making its watches more competitive
relative to other foreign timepieces, but that advantage will grow with
any new "luxury tax".
Although Hong Kong watches with a price tag of more than $1,200 will also
be subject to China's "luxury tax", Yip believes consumers will become
more cost-conscious.
"(The luxury tax) makes watches more expensive, but fortunately, because
we have this agreement, it will make Hong Kong watches even more
attractive in the mainland," Yip said.
"Twenty percent is a lot of money, so people will start (buying) similar
products made in Hong Kong," he said.
"People will start making some comparisons, and if the products are
similar quality and even the brand name is similar, (they will switch),"
he said.
Yip himself was wearing a Swiss watch during the interview, but said he
wore a Hong Kong-made watch at home.
Hong Kong is also set to gain from increased tourism as wealthy Chinese
consumers travel and buy their high-ticket items in Hong Kong to avoid
China's luxury tax. Yip said 12.5 million Chinese tourists visited Hong
Kong last year.
Analysts estimate China takes about 3 percent of total Swiss watch
exports, with Swatch Group's Omega, Longines and Rado brands among the
most popular.
The country's changes in taxes will be the biggest adjustment to
consumption taxes in 12 years.
(For more biz stories, please visit Industry Updates)
(For more biz stories, please visit Industry Updates)
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