This paper examined the role of the alcohol industry in the changes to alcohol tax policy in Hong Kong. More specifically, we investigated how the industry actors sought to successfully influence policymaking in an effort to abolish the duties on alcohol. The conversion of Hong Kong from an environment of high alcohol taxation to a duty-free zone was done with remarkably high speed and efficiency over a two year period. Although the city’s changing financial circumstances and the Hong Kong Government’s strong propensity towards economic liberalism have in part contributed to such a dramatic transformation, the alcohol industry’s tactics and strategies were clearly the main drivers of the policy decision. Whereas the alcohol industry had been constantly vociferous in lowering the alcohol tax, the second half of the 2000s witnessed striking changes in the political tactics and rhetoric that they employed to lobby for selective amendments to licensing laws and to the ways in which alcoholic products were taxed.
To comprehend how the alcohol industry successfully advanced their vested interests and carefully positioned themselves in the policy-making arena, it is important to identify the political tactics that they employed. From the experience of Hong Kong, the industry’s political tactics were two-fold. The first tactic was to forge a new coalition. The alcohol industry lobbying as a whole was not tightly integrated and coherent right from the beginning. The industry actors came to realize that individualized and haphazard lobbying techniques were not effective in shaping the views of legislators or the public on alcohol tax issues. The alcohol industry, notably the HKWSIC, employed a tactic that was designed to encompass a range of alcohol-related catering and trade industries so that these like-minded actors could form common ground in the pursuit of changing the taxation policy.
Over the years, coordinated efforts among these actors were fundamental to facilitating action, representing their shared interests about how alcohol tax policy should be changed, and determining the outcome of policy debates towards a zero-alcohol tax. The formulation of alcohol tax policy was effectively facilitated by the bridges the coalition built with politicians to allow for a broader and more coordinated array of influence. Our findings clearly point to a prominent role played by a few business-friendly legislators such as Tommy Cheung and James Tien on the policy-making scene. They acted as what could be known as “policy brokers”, whose positions and bargaining power enabled them to influence outcomes of policy debates to their advantage [72
]. The very fact that these policy elites represent business interests speaks of the homogeneity of the coalition. By managing coordinated interactions of constituent actors and acting in a concerted manner, the coalition was able to achieve such unprecedented success.
The second tactic was to deliberately employ the communication programme and publicity that might fit into the overall aim of making the city a tax-free environment. The coalition needed to develop an appropriate blend of ideas to lobby for the abolition of taxes on alcohol. While the underlying policy goal of the alcohol industry was to foster corporate preferences, calling for tax reductions publicly as such was not ideal. Therefore, a message was carefully presented in such a way that alcohol tax reduction would benefit Hong Kong as a whole. The coalition’s message was structured around four key ideas which were closely tied in with the coalition’s corporate interests.
The first idea was that tax reduction would stimulate Hong Kong’s economy, boost tourism and thus enhance employment prospects. More specifically, the coalition maintained that Hong Kong should be the region’s centre for wine exhibition, trading and logistics. The core argument was that removing wine duties would encourage more investment from international wine traders, which would in turn create more jobs and bring other economic benefits to Hong Kong. Second, in an attempt to gain public support, it was claimed that excessive alcohol duties deprived ordinary Hong Kong drinkers of the enjoyment of affordable alcoholic beverages. Newspaper interviews and other speaking opportunities were strategically used to carefully shape the public perception that a cut in alcohol taxation would vastly benefit consumers through a reduction in retail prices. The third idea advanced by the industry coalition was that Hong Kong’s high alcohol tax drives consumers to lower jurisdictions to buy alcoholic beverages, thereby losing revenue for the government and reinforcing the illegal smuggling and illicit activities connected with the alcohol market. Indeed, the alcohol industry repeatedly propagated an idea that should the existing tax be maintained, the government would not achieve its intended increase in revenue as a result of alcohol smuggling and trading-down effects toward the consumption of cheaper alcohol. Fourth, moderate consumption of wine was framed as conducive to good health. Although the beneficial effects to the heart of moderate consumption of red wine are contentious, the alcohol industry communicated these benefits to the public in a very aggressive manner.
Our findings reveal that policymakers appeared to have been swayed by the industry’s argument, notably the economic merits of their proposition. The resultant outcome was that the alcohol tax policy in Hong Kong was interpreted and formulated solely in the trade arena rather than in the domain of public health. Because government officials and policy elites saw alcohol as an ordinary commodity [74
], it was commonly believed that eliminating taxes on alcohol and expanding for commerce would be beneficial to the city as a whole. In particular, the idea of turning Hong Kong into the fine wine hub for the Asian market sharply attracted government authorities to the extent that policies for tax reduction and elimination could be executed over such a short period of time. The new licensing act clearly reflected the government’s inclination towards a market-based approach in view of what is seen as the booming demand for wine from Asia and mainland China [75
Regrettably, where the alcohol tax policy was framed and justified strictly in fiscal/economic terms, an alternative argument from CSOs was barely present. Because the rhetoric of competitiveness, free markets, and economic prosperity dominated political and policy agendas, there was little room for CSOs to counteract commercial interests. Such general lack of counter arguments on the tax reduction from the community at large appeared to facilitate the implementation of the zero-tax policy. Additionally in Hong Kong, CSO activities have traditionally been confined to certain public health issues such as tobacco control and air pollution. Defining alcohol as a public health concern emerged only recently after the zero alcohol tax was implemented [14
]. Hong Kong’s experience in alcohol tax policy changes sheds light on a scenario where in the absence of strong civil and public health advocacy, the alcohol industry assumes the key role in policy making [77
]. Put bluntly, the real and potential harms to public health by alcohol misuse are being insidiously cast aside by the industry players in their bid to pursue vested interests with the misleading claims of health benefits.
From the perspective of public health, it is important to debunk the alcohol industry’s misleading narratives, and to critically assess the impact of the Hong Kong Government’s policy decision on the zero beer and wine tax. In this sense, this paper raises more questions than it answers. For instance, is the overall trend in early-age alcohol uptake and alcohol consumption by the youth in Hong Kong expected to escalate since they are more sensitive to a drop in price? What would be the external costs of the abolition of the alcohol tax? Can we observe any changes in crime, homicide, domestic violence, suicide, and productivity losses associated with the consumption of alcohol? More fundamentally, even if the abolition of the tax on alcohol would bring economic benefits, what would be the gains and losses in government revenue and what are the opportunity costs foregone? What would be the long-term public health implications and resultant social costs of such a policy? In terms of the provision of public goods, would the economic benefits of the abolition of the alcohol tax adequately compensate for this? How are the economic benefits distributed in Hong Kong society to justify such a sacrifice in terms of public health? Would the profits earned be concentrated in the hands of a few companies that only profess verbally to have Hong Kong’s interests at heart? From a regional perspective, to what extent does the transformation of Hong Kong into a wine hub affect alcohol use in neighboring areas in Asia and Mainland China? Does the regional public health community follow the impact and prepare other countries to anticipate similar industry initiatives since Hong Kong provides an excellent industry playbook? Hong Kong is a unique opportunity to examine such effects as no other jurisdiction has adopted such an unprecedented policy of alcohol taxation.