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The Government today (November 23) announced a proposal to extend the concessionary duty rate for ultra low sulphur diesel (ULSD) of $1.11 per litre for a further two years. The proposal will be implemented subject to the approval of the relevant resolution by the Legislative Council in accordance with the Dutiable Commodities Ordinance.
The Government plans to move a resolution in the Legislative Council on December 13, 2006, to extend the current concessionary duty rate for ULSD for a further two years. If the resolution is passed, the concessionary duty rate for ULSD will remain at $1.11 per litre up to December 31, 2008. The extension of the duty concession will cost the Government about $1.1 billion each year in 2007 and 2008.
The Government appreciates the impact that high oil prices have had on certain sectors, including the transport industry, during the year. In fact, the Government's decision to propose an extension of the concessionary rate for ULSD has taken into account the operating environment of the transport industry, the overall economic conditions and our public finance position. In view of the present difficulties faced by the transport industry and the likely situation that oil prices will continue to stay high, this is the first time that the Government has proposed to extend the concessionary duty rate for ULSD for two years.
A government spokesman said that the duration of each of the previous extensions had not been more than one year. He believed that the proposed extension for two years would help the transport industry to face the pressure of high oil prices. The spokesman added that as the concessionary rate was already relatively low, there was little room to reduce it further, and any extra revenue loss from such a move would not be justified by the ensuing benefit to the transport industry.
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 concessionary level of $1.11 per litre in order to encourage switching from regular diesel to this cleaner, but more costly, fuel. Since then, ULSD has replaced regular diesel as the fuel for diesel vehicles.
According to previous resolutions passed by the Legislative Council, the concessionary duty rate for 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 seven occasions - December 2000, June 2001, March 2002, March 2003, March 2004, December 2004 and December 2005 - the Government, with the Legislative Council's agreement, extended the concessionary duty rate of $1.11 per litre as a measure to provide economic relief for the transport industry. This is the eighth time the Government has proposed to extend the concessionary rate for ULSD.
Ends/Thursday, November 23, 2006
Issued at HKT 18:22
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