| Publication |
2010.
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| Summary/Abstract |
Fiscal autonomy is a defining principle of China's arrangements for Hong Kong's postcolonial administration and was a major feature of British rule before 1997. This article begins with a discussion of how this colony achieved unusual freedom from London's usual oversight of colonial governments. After rejecting Colonial Office demands for a modern income tax, Hong Kong stuck to the principle of "low tax, small government," defying London's repeated calls for increased public expenditure on social development while resisting local business pressures for subsidies and tax concessions. The analysis then identifies fiscal freedom's contribution to Hong Kong's growth as an international financial center. The discussion explains the link between Hong Kong's unfashionable fiscal conservatism in the 1950s and 1960s and the buildup of government reserves to a level which permitted Hong Kong to control its own monetary affairs, including an independent currency. The final section assesses the gains and losses, both economic and social, which accompanied this fiscal independence. The analysis makes extensive use of unpublished archival material.
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