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Liquor prices to rise after new tax policy
Published on: 2009-08-06
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High-end Chinese liquor retailers in Tianjin are expecting a price hike after an increase in the state consumption tax on liquor that took effect on August 1, as distillers will eventually pass the cost to consumers.

The previous consumption tax on liquor included a specific duty of 1 yuan per kilogram, and a 20-percent ad valorem duty on the factory price. In the new policy, the government has changed the tax base and duties on liquor while retaining the 20-percent ad valorem duties, which means the consumption tax paid by each enterprise would probably double after the new policy took effect.

The new policy aims to tackle tax evasion by white liquor makers. Under the earlier dispensation, liquor makers could avoid paying most of the tax by selling their product to distributors at low prices and then reselling them to shops at a much higher price.

According to the Tianjin Morning Post, local liquor dealers and franchisers have not raised prices until Sunday.

"We haven't received any formal notice from the manufacturers about a price increase, but prices will definitely go up. The time of price rises is not yet known," said Ms Zhang, a first-level liquor dealer.

Some retailers say they have received oral notices from their suppliers about an upcoming price increase. “Our suppliers have informed us that some high-end liquor prices will go up, but we are still waiting to see how the market will react if some retailers raise their prices.”

According to the Xinhua News Agency, the Sichuan-based Tuopai Yeast Liquor had released a notice saying that they would be raising their prices after the new tax regimen took effect, making it the first liquor producer to announce a price rise. But its dealers have not received a formal notice.

Although no formal notice about a price rise has been released up until Sunday, some high-end brands’ prices, such as Maotai and Wuliangye, have gone up in some shops owing to a short supply. The price gap of Maotai at different shops can be as great as over one hundred yuan. 53 degree Maotai at Huarun Wanjia Supermarket is 698 yuan while selling at only 580 yuan in one franchised shop.

"Dealers and franchisers are storing up their shelves since the news came out and the suppliers are supplying goods slowly”, said Ms Zhang.

In anticipation of the price rise, customers are rushing out to buy liquor. Some high-end liquors in some categories have sold out.

"The sales of high-end liquors such as Wuliangye have doubled,” one sales manager with Carrefour told reporter.

Sales people do not worry about the impact of the price rise. “The rise in prices won’t squeeze our profits. Customers who buy high-end liquor won’t care much, since they have strong buying power and also buy them as gifts,” one manger surnamed Wang with a liquor franchised store at Dagu Nanlu said.

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