Hong Kong Considers Lifting Ban on E-Cigarette and Tobacco Product Exports to Boost Revenue

The Hong Kong Special Administrative Region of China may lift its ban on the export of electronic cigarettes and other heated tobacco products by land and sea before the end of 2022 to boost government revenue.

Hong Kong's Financial Secretary Paul Chan has forecasted that the city's budget deficit this year will exceed HK$100 billion ($12.7 billion), nearly double the original prediction due to the impact of COVID-19 and a weak external economic environment.

The core issue lies in Hong Kong's narrow tax base. The government must find some long-term solutions to broaden its revenue stream, otherwise, many policies may have to be reversed.

A government insider has revealed that senior officials are considering easing transport restrictions on smoking alternatives exported from Hong Kong due to the immense value of re-exports and to ease the financial burden on the Hong Kong government. The aim of the amendment is to prevent new tobacco products from returning to Hong Kong through re-exports. This new measure will overturn the current ban on electronic cigarettes, where Hong Kong was a major transfer point for domestic electronic cigarette products before the ban. According to a report by the China Electronic Cigarette Chamber of Commerce in December, 95% of electronic cigarette products worldwide are produced on the mainland, of which 90% have an export value of about RMB 1.38 billion ($19.23 billion). Under existing laws revised last year and effective at the end of April, no one can import, sell, or manufacture electronic cigarettes, heated tobacco products, or herbal cigarettes. Offenders will face fines of up to HKD 50,000 ($6,370) and imprisonment for up to six months, but consumers are still allowed to use electronic cigarette products.

Another survey by the association indicated that the estimated annual shipment of affected e-cigarettes is 330,000 tons, representing approximately 10% of Hong Kong's annual air exports. The ban is estimated to impact the re-export value of over RMB 120 billion.

The Chairman of a certain conglomerate, Lau Ho-hsien, stated that the ban has shaken Hong Kong's position as a regional transport hub and has caused a significant blow to people's livelihoods.

Legislator Edward Yiu has stated that a proposed amendment to Hong Kong’s current ban on e-cigarettes may include provisions that allow for the export of these products through sea and air transport, due to the establishment of a joint cargo checkpoint in Dongguan. This checkpoint would serve to prevent e-cigarettes from entering the local community. While the government has expressed concerns regarding the risks associated with these products, the introduction of this new security system to plug transport loopholes means that there may be a possibility to amend the law.

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