Heritage Foundation Leadership for America

The Wall Street Journal reports on Hong Kong's continued tax-cutting efforts. Even though Hong Kong is prospering and is rated as the freest economy in the World by the Index of Economic Freedom, policymakers continuously strive to remain on top. The latest example is the repeal of the 15 percent death tax. This tax was low compared to other nations, and it applied only to Hong Kong-based assets, but it still undermined the jurisdiction's competitiveness:

A recent tax cut in a city already known for its low-tax policies could boost Hong Kong's standing as an asset-management center for wealthy international investors. Late last year and with little fanfare, Hong Kong eliminated its estate tax, which exacted as much as 15% of the value of any assets held in the city, including real estate, stocks and luxury goods, when their owner passed away. ...Getting rid of the tax also levels the playing field with Hong Kong's biggest competitor as a financial hub in Asia, Singapore. The city-state doesn't impose an estate tax on nonresidents. ...Florence Yip, a partner at PricewaterhouseCoopers, notes that the absence of an estate tax will help woo overseas capital that already has been attracted by a policy of no capital-gains tax. It also could prompt some small- and midsize-business owners concerned with inheritance issues to set up holding companies in Hong Kong rather than in offshore tax havens such as the Cayman Islands or the British Virgin Islands, says a Hong Kong-based banker.

--- Daniel Mitchell Ph.D.