Taxing land rent, lowering other taxes – the case of Hong Kong

Abstract

PurposeThe purpose of this paper is threefold: to study if Hong Kong’s fiscal revenue is closely related to land rent; to assess if a fiscal regime relying on taxing land rent is good for the economy; and to explore if Hong Kong adopts a high land price policy.Design/methodology/approachIn this paper, first, theoretical and conceptual exploration into the Henry George Theorem is made to investigate if a single tax regime is conceptually feasible. Second, time series econometric study investigates into the determinants of Hong Kong’s fiscal revenue and Hong Kong’s public expenditures. Granger causality tests are conducted to study the direction of causality.FindingsHong Kong does not have a high land price policy; it uses a multipronged approach to tax land rent, which cannot be precisely identified; its low tax regime is good for the economy and contributes to a virtuous circle: taxing land rent, low taxes, vigorous economy, higher land rent and low taxes.Originality/valueThis study uses a familiar methodology on a subject on a policy area that has not been studied before.