Taking niche watch brand Breitling as an example, the average watch prices in Hong Kong only account for 70 per cent mainland prices, according to Shirley Ng, marketing manager of Breitling's Hong Kong and Mainland Division.

Figures from the General Administration of Customs also indicate that there is a large tax and duty gap between local and overseas markets especially Hong Kong, where there is no tariff, and Europe, where foreign travellers enjoy a tax refund.

For instance, the general duty on mechanical watches made of precious metal is 80 per cent, plus 17 per cent value-added tax and 20 per cent consumption tax, so the adjusted tariff on travellers' overseas purchase of 30 per cent is still very low.

It is the same case for cosmetics. For eye beauty products, China imposes a general tariff as high as 150 per cent, adding a 17 per cent value-added tax and a 30 per cent consumption tax, compared with the new 50 per cent duty on travellers' overseas purchases.

Liu said it is not surprising to see the government raise tariffs on individual's overseas purchases after this April's consumption tax adjustment. China imposed a domestic consumption tax of 20 per cent on luxury watches, and a tax of 10 per cent on golf clubs and related equipment.

Such a policy has driven many local customers from domestic to foreign markets.

"The government wants to change this situation and stimulate domestic consumption," he said.

Liu predicted that such a tariff will be further increased, because in every country, taxes and tariffs on luxury goods are crucial tools to balance the rich and the poor.

Even without the price difference, people prefer to buy from abroad, said Yves Carcelle, Louis Vuitton's chairman and chief executive officer.

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