Hong Kong’s total population is around 7 million. The workforce is 3.75 million. So generous are the tax breaks and allowances, only about 1.5 million people pay any tax at all.
A single person can earn HK$108,000 a year (about US$14,000) before owing any tax. And a married person with a dependent spouse can earn HK$216,000 (US$28,000) tax-free.
For those who do pay tax, the maximum rate tops out at 17%… and most people pay less. There is no sales tax, no VAT, no capital gains tax, and no tax on dividend income. I can even buy all my favorite wines here completely free of tax or duties.
With such a liberal tax regime, you’d think the Hong Kong government would be struggling to make ends meet, right?
In fact, the Hong Kong government’s coffers are awash with so much money it just announced a projected budget surplus of 3.5% of GDP for the fiscal year ending March 31, 2012. This will leave it with cash reserves of about HK$662 billion (US$85 billion), or 22 months worth of expenditure.
Looked at another way, the Hong Kong government is sitting on about US$12,150 in spare cash for every man, woman and child in the territory, and they are rebating much of this to citizens over the next few months.