[Bruce Wayne]

Its an interesting point about the tax situation in Hong Kong. For those not familiar with taxation there here is a summary:

Hong Kong has no payroll tax for Social Security, no general sales or value-added tax, no tariffs on imports and no personal tax on income from financial assets. What Hong Kong has is called a "Dual Tax" -- progressive tax rates on labor income but a flat tax of 17.5 percent on corporate profits, 16 percent on property owners and unincorporated enterprises.

The low tax on profits brings in substantially more revenue than the tax on salaries, in marked contrast to the United States, which collects little from profits taxes that are nominally twice as high. Corporations in Hong Kong pay the profits tax before distributing dividends to shareholders, so there is no extra tax on dividends to be collected from individuals. Reinvested profits result in more business income to tax in the future, so there is no extra tax on capital gains to be collected from individuals.

Companies in Hong Kong deduct interest payments, however, so it would be theoretically appropriate to tax individuals on income they receive from local corporate bonds. This exemplifies the key tax principle of symmetry: Whatever is a deductible expense for those making any payment ought to be taxable income for those receiving that payment. But there would still be no need for individuals to report interest income, because a flat tax can easily be collected at the source, before the check goes out.

Personal income (salary) is taxed thus:

15% of "assessable income" after the deduction of allowances (raised to 16% in the 2003/2004 budget); or

A progressive rate levied on "assessable income" after the deduction of allowances. These progressive rates are:
Nil to HK$35,000 - 2%
HK$35,000 to HK$70,000 – 7% (8% from 2004)
HK$70,000 to HK$105,000 – 12% (14% from 2004)
HK$105,000 upwards – 17% (20% from 2004)

You can also get deducations from your taxable salary of the following:

Charitable contributions representing up to 10% of an individual's income;
A residential care allowance in respect of a parent or grandparent of up to US$7,700 per annum.
Home loan interest deductions of up to US$12,800 per annum, for 5 years (extended to 7 years in 2004).
A current pension allowance of up to US$1,550 per annum conditional on the monies being invested in a recognized pension fund.
Depreciation allowances on all plant and machinery essential to the production of income subject to salaries tax.
A single person's allowance of US$13,850 (reduced by about 8% in the 2003/2004 budget)
A married persons' allowance of US$27,700 (reduced by about 8% in the 2003/2004 budget)
Child allowances of US$3,850 on the first and second child and US$1,925 thereafter.
Dependent parent, grandparent,sister, brother sibling (to include more than one where necessary) - allowances US$3,850 each.
Dependent disabled person's allowance of US$7,700
Education allowance of US$3,850 for any course which educates or assists an employee in his profession.

So you can see that people have a choice over whether they are taxed progressively or via a flat rate. With either system the tax rate is incredibly low, yet the tax revenue is approximately 1% of GDP less than in America, despite the US having much higher general taxes.

I would like to think VJW that even you can see that such a system of flat tax with high personal allowance certainly would not harm low earners as they would probably get to keep large chunks, if not all, of their salary as personal allowance. They also would not be taxed on purchases, savings or investments.