The tourism industry, one of the pillars of Hong Kong's local economy, feared that it would be the hardest hit if the goods and services tax was introduced in Hong Kong.

A spokesman for Hong Kong Tourism Board (HKTB) said duty-free concept had long been their promotion strategy, and the introduction of the tax would affect tourists' consumption.

The spokesman urged the government to exercise prudent consideration on the opinions and objections from the tourism sector.

The board was planning to collate reactions from the travel trade and visitors through consultation and market surveys, the findings of which will be submitted to the government.

The spokesman hoped that the tax would not affect tourists' inflow and visitors' spending in Hong Kong, or undermine the city's reputation as a "shopper's paradise".

Inbound Tour Operators Association chairman Charles Ng said the mainland visitors' spending in Hong Kong had been dropping from about HK$7,000 per person in 2000.

HKTB figures showed that the per capita overnight mainland visitors' spending had reached HK$5,487 in 2002 and HK$5,235 in 2003. But the figure dropped to HK$4,355 in 2004 and HK$4,554 in 2005.

The per capital overnight visitor spending in all major market areas in 2005 was HK$4,663, of which 53 per cent was on shopping.

Ng said the consumption pattern of the mainland visitors had changed since the introduction of individual travellers scheme.

"In the past, mainland people would purchase their favourite items. But they can come to Hong Kong more easily now, and they will not purchase until they have compared the prices and decided that it is really worth buying," he said.

Ng said Hong Kong's attractiveness was losing as a lot of products that were exclusive to the city in the past could be bought in major mainland cities.

Ng also said mainland tourists travelling on packaged tour would look for bargaining price for goods and services.

"If the tax is introduced, prices will go up and the tourists will have less demand for our goods and services," he said.

This will severely affect the operation of travel agencies, he said. "Tourists may not come to Hong Kong for shopping. Some travel agencies might close and this will affect the whole economy. Introducing the tax is more a loss than gain," he said.

However, Sunflower Travel assistant general manager Henley Tse said introducing the tax would not affect the sector as it was a common practice in other countries, including Japan, Korea and Singapore.

Hong Kong's reputation as "shopper's paradise" will not be affected as the special administrative region is well-known for offering genuine and high quality goods, he added.