While Britain, the US, and most of the entire western world struggle, Hong Kong has more money than it knows what to do with. By the end of this March, the local administration’s reserves are expected to balloon to £63 billion (US $94 B) or £9,000 per citizen.
Last week’s Hong Kong budget showed an embarrassing surplus of £5.56 billion for the year, despite the government giving every resident £514 (US$770) cash, high inter-structure expense and subsidizing electricity. And although Hong Kong is part of China, under the agreement between London and Beijing, it is run like a separate country.
Although only the well-off pay any tax, to keep residents from marching against greed, the finance secretary pledged even lower taxes and more help for the poor and elderly. Policies that western governments with their increasing squeeze couldn’t dream of. The top rate of 17% income tax remains, but corporation tax is to be reduced from 17.5% to 10% for small companies.
Hong Kong is already the freest economy in the world, with no tax on goods or services, dividends, interest or capital gains. Only cigarettes and fuel attract revenue of significance – although transport costs a fraction of UK prices. Wine tax was abolished the other year, and a can of 5% beer can be brought in a shop for as low as £0.22 (US$0.33).
This wonder of economics, the envy of other countries, shows how faith in the free market with little meddling pays off. No army to invade other lands or extremes of poverty or far-flung geographical regions helps. So does oriental family values and a hard-work and save culture. Same for no debt attracting interest and a non-democratic regime without high social welfare helps.
Of course this is an over-simplification and the rise of Mainland China has made Hong Kong rich, but western economy could learn. In the 21st-century high tax doesn’t bring in money: it drives it abroad.
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