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The Legislative Council passed a resolution moved by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, today (December 1) to implement the extension of the concessionary duty rate on ultra low sulphur diesel (ULSD).

The Financial Secretary announced on October 20 that he proposed extending the concessionary duty rate on ULSD until the end of 2005. The proposal has taken into account the pressure faced by the transport industry, the overall economic conditions and the Government's fiscal position. The Government considers that although Hong Kong's economic activities as a whole have a relatively low reliance on oil, certain individual sectors will be hit harder by high oil prices.

In June 1998, the Government reduced the duty rate for regular motor diesel from $2.89 to $2 per litre as a temporary relief measure during the Asian financial crisis. When ULSD was first introduced in July 2000, the duty was set at a relatively low $1.11 per litre for environmental reasons in order to facilitate a cost-neutral switch from regular diesel to this less-polluting, but costlier, fuel. Since then, the diesel-fuelled vehicles in Hong Kong have completely switched from regular diesel to ULSD.

"According to previous resolutions passed by the Legislative Council, the duty on ULSD was to be adjusted to $2 per litre on January 1, 2001 and to $2.89 per litre on January 1, 2002. However, on five occasions - end-2000, June 2001, March 2002, March 2003 and March 2004, the Administration, with the Legislative Council's agreement, extended the concessionary duty rate of $1.11 per litre, as a measure to provide temporary economic relief for the transport industry," a Government spokesman said.

"This is the sixth extension of the concessionary rate," the spokesman added.

With the passage of the resolution on ULSD under the Dutiable Commodities Ordinance today, the duty on ULSD will remain at $1.11 per litre up to December 31, 2005. The duty is due to revert to $2.89 per litre on January 1, 2006. This concession will cost government revenue about $1.1 billion in 2005. The several duty concessions since 1998 have so far cost the Government a total of about $7.9 billion.

Ends/Wednesday, December 1, 2004

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