Hong Kong Dollars and Indian Cents

In a blog post yesterday, I mentioned that Hong Kong topped the 2008 Wall Street Journal/Heritage Index on Economic Freedom, with Cuba and North Korea bringing up the rear, naturally. With this latest news, the country seems poised to further widen their lead (Hong Kong's score: 90.25, U.S. score: 80.56). The AFP reports:

Hong Kong's financial chief said Wednesday he will cut salary and corporate taxes and abolish duty on beer and wine after a booming economy pushed the city's budget surplus to a record high. In his maiden budget speech, Financial Secretary John Tsang said he would increase spending on health services and introduce measures to bridge the widening wealth gap and reduce air pollution.

Duty on beer and wine–currently at 40 percent–will be cut with immediate effect.

Tsang estimated the budget surplus would reach a record 115.6 billion dollars (14.8 billion US) in the fiscal year to March, four and a half times the government's forecast and nearly twice as much as last year's figure. The territory's fiscal reserves will reach 484.9 billion dollars, he said.

Tsang attributed the surplus to higher-than-expected tax revenues from the city's booming stock and property markets as well as company profits and salaries.

Tsang fulfilled the government's last year promise to cut salaries tax to 15 percent in 2008-09 from 16 percent and the corporate tax rate to 16.5 percent from 17.5 percent.

He also announced a one-off tax reduction of 75 percent of salaries tax and tax under personal assessment with a ceiling of 25,000 dollars.

And don't miss Milton Friedman's 1980 video paean to the open economy of Hong Kong.