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Following is a question by the Hon Chan Yuen-han and a reply by the Secretary for Transport and Housing, Ms Eva Cheng, at the Legislative Council meeting today (May 28):
International crude oil price, which has continued to rise over the past few years, recently reached a record high of US$127 per barrel. Moreover, oil companies in Hong Kong have raised the selling prices of motor vehicle fuels for five times since the beginning of the year, resulting in an accumulated increase of more than 5 per cent. In this connection, will the Government inform this Council whether:
(a) it has assessed the impact of persistently high fuel prices on the competitiveness of the relevant trades in Hong Kong, such as logistics, transport and tourism industries; if it has, of the findings; if not, whether it will conduct such an assessment;
(b) it knows which countries currently do not impose duties on motor vehicle fuels or had abolished such duties in the past two years; whether it will consider abolishing the fuel duty, which accounts for 10 per cent of the diesel retail price, so as to reduce the impact of high oil price on the relevant trades; if not, of the justifications for that; and
(c) it knows which places, apart from the Mainland, have provided subsidy on the retail price of diesel; whether it will consider providing such subsidy?
Reply:
Madam President,
(a) According to the Government Economist, fuel costs accounted for about 17 per cent of the total operating cost of the transport and related sectors as a whole in 2006. The figures are based on the latest Annual Survey completed by the Census and Statistics Department in 2007. An increase of about 24 per cent in the retail price of diesel in the period from January 1, 2008 till now is expected to add about 4 per cent in their operating costs. However, I have to point out that the exact impact varies among the individual sectors and some are more hard hit, depending on the fuel used and the intensity of fuel consumption. Air transport is a case in point. According to information from the industry, fuel cost takes up about 30 per cent to 40 per cent of an airline's operating cost. Given the high level and volatility of fuel prices, energy-intensive sectors such as transport are feeling the impact more keenly and such effects are also transmitting into sectors that are dependent on transport support, including logistics and tourism.
(b) We are aware that most major economies levy one or more types of tax on fuel. Even though some economies, e.g. Mainland, Singapore and Malaysia, do not have fuel tax per se, they generally levy other forms of tax, such as customs duty or sales tax. We have no information on the abolition of fuel tax in other economies in the past two years.
(c) We also know that some economies, such as the Mainland, Indonesia, Malaysia and Taiwan, are providing subsidies on retail price of diesel.
It is the Administration's established policy to levy fuel tax on fiscal, environmental or transport grounds. With the introduction of a concessionary duty of $0.56 per litre for Euro V diesel since December last year, down from the previous concessionary duty rate of $1.11 per litre for ultra low sulphur diesel, duty on diesel currently represents less than 5 per cent of the retail price. This is among the lowest in the region. Moreover, the Administration has undertaken to review the concessionary duty rate before making the Euro V diesel the statutory standard in 2009. The revenue and the environmental protection considerations, as well as the economic implications on the trade, will all be covered in the review.
Madam President, the Administration is concerned about the impact of inflation on livelihood and business environment. Taking into account the three basic principles in public finances management, i.e. "commitment to society", "sustainability" and "pragmatism", the Financial Secretary has already announced a series of relief measures in the 2008-09 Budget, including one-month rental relief for lower-income families living in public housing estates; one-off tax reduction for salaries tax, profits tax and property tax; waiving of rates and business registration fee; electricity charge subsidies, etc. In addition to these measures, the sustained labour productivity growth should help provide some cushioning effect to inflation. The Government will consider all feasible and effective measures to address rising inflation.
Ends/Wednesday, May 28, 2008
Issued at HKT 16:01
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