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

What is it about?

The authors study the extent to which Hong Kong relies on taxing land rent in order to achieve its low tax status. It is not possible to identify pure land rent and a single tax on pure land rent as suggested by Henry George is untenable. But Hong Kong has succeeded in deriving a significant portion of government revenue from land rent using a myriad of land rent-related taxes including land premiums, rates, property taxes, and ad valorem stamp duties. Empirical evidence shows that the government’s revenue is highly responsive to movements in housing prices, which reflect movements in land rent. To the extent that Hong Kong’s low tax rate regime contributed to a more vibrant economy and higher land and property prices, and that higher land and property prices in turn contributed to a vibrant economy, application of the Georgian principle of taxing land rent may have created a virtuous cycle in Hong Kong.

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