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In response to the transport industry's recent request to reduce or abolish the duty on ultra low sulphur diesel (ULSD), a spokesman for the Financial Services and the Treasury Bureau pointed out today (March 1) that the Government had extended the concessionary duty rate on ULSD for another year in December last year to alleviate pressure on the industry. He said that in making this decision, the Government had taken into account various factors including the pressure faced by the transport industry, Hong Kong's overall economic conditions and the Government's fiscal position.
"The Legislative Council passed the relevant resolution in December 2005. The existing concessionary duty rate on ULSD will remain at $1.11 per litre up to the end of December 2006," the spokesman said.
With the passage of the resolution on ULSD under the Dutiable Commodities Ordinance on December 14, 2005, the duty on ULSD will remain at $1.11 per litre up to December 31, 2006. This concession will cost government revenue about $1.1 billion in 2006. The several duty concessions since 1998 and the extension for 2006 will have cost the revenue about $8.9 billion on a cumulative basis.
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 to facilitate a 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, the Government, with the Legislative Council's agreement, has subsequently extended the concessionary duty rate of $1.11 per litre on six occasions between December 2000 and December 2004, to provide temporary economic relief for the transport industry. The extension in December 2005 was the seventh extension of the concessionary rate on ULSD.
"The duty is due to revert to $2.89 per litre on January 1, 2007. The Government will review the issue of ULSD duty before the expiry of the concessionary period and will take into account global oil prices as well as its impact and pressure on the transport industry before taking a decision," the spokesman said.
Ends/Wednesday, March 1, 2006
Issued at HKT 15:01
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