I’m currently contributing a short, light-hearted political column to Hong Kong Time Out Magazine. Below is the uncut, original version of my latest piece…
Einstein claimed that the hardest thing to understand in the world is tax, yet even our most air-headed pseudo-model would grasp HK’s straightforward tax system. We’ve no sales, estate or currency tax, capital gains or VAT, and individuals pay 2%, 8% and 12% income tax progressively. Only the filthiest of the filthy rich (just 1.7%) pay the highest band of 17%. HK’s rates are relatively super low – it may just feel a lot because our demands arrive in one annual beating, such is the simplicity of our tax law. In fact, the entire ordinance stretches to just 200 pages and has barely changed in 60 years.
Pleasingly, the richest 8% (100,000 Peak-dwelling posh types – CEOs, lawyers, magazine editors etc…) contribute 57% of the total tax yield. Meanwhile, 60% of HK workers pay sod all – just as well since we’ve Asia’s widest poverty gap and no minimum wage. However, the tax burden distribution is shifting very slowly towards the less well-off with tax on the rich falling and talk of introducing a VAT – effectively an indiscriminate, indirect tax on the poor. Already public spending is around 10% lower than many similar countries at just 20% of GDP.
Furthermore, our low 17.5% corporate tax rate also makes us the world’s third most favoured tax haven. After the financial crisis made this tag a swearword, Hu Jintao ensured the SARs were excluded from a list of ‘uncooperative havens’ (hell, we’re not proper countries anyway right?). Any old corporate world-beater is still welcome to stash cash here to avoid tax – and they won’t be liable locally at all unless doing business within our borders.
Reform is overdue domestically to protect the vulnerable and we are under pressure to commit to international tax standards. Unfortunately, our prosperity and economy are based on some of the uglier elements of capitalism – lawmakers admit the tax system is ‘inherently inequitable’ and thus the rate of change is likely to be taxingly low.