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Concessionary duty rate on ultra low sulphur diesel to be extended for another year

    The Government announced today (October 31) a proposal to extend the concessionary duty rate on ultra low sulphur diesel (ULSD) of $1.11 per litre for another year.  The proposal will be implemented subject to approval of the relevant resolution by the Legislative Council in accordance with the Dutiable Commodities Ordinance.

     The Government will move a resolution in the Legislative Council before the expiry of the existing concession at the end of this year to extend the current concessionary duty rate on ULSD for another year.  If the resolution is passed, the concessionary duty rate on ULSD will remain at $1.11 per litre up to December 31, 2006.  The duty rate will revert to $2.89 per litre on January 1, 2007.  The extension of the duty concession will cost the Government about $1.1 billion in 2006.

     The Government appreciates the impact of recent high oil prices on certain sectors, including the transport industry.  In fact, the Government's decision to propose an extension of the concessionary rate on ULSD has taken into account the pressure faced by the transport industry, the overall economic conditions and the Government's fiscal position.  A government spokesman said the proposal put forward by concerned parties to make further concession or even to abolish the duty on ULSD was neither a feasible measure nor a solution to the problem of 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 concessionary level of $1.11 per litre for environmental reasons in order to facilitate a cost-neutral switch from regular diesel to this cleaner, but more costly fuel. Since then, diesel-fuelled vehicles in Hong Kong have completely switched from regular diesel to ULSD.

     According to previous resolutions passed by the Legislative Council, the concessionary duty rate 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 six occasions - December 2000, June 2001, March 2002, March 2003, March 2004 and December 2004 - the Government, 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. This is the seventh time the Government has proposed to extend the concessionary rate on ULSD in the light of Hong Kong's economic and overall situation.

Ends/Monday, October 31, 2005
Issued at HKT 16:41


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