Country Reports On Economic Policy and Trade Practices Department of State report submitted to the Senate Committees on Foreign Relations and on Finance and to the House Committees on Foreign Affairs and on Ways and Means, January 1998. With few exceptions, the government allows market forces to set wages and prices, and does not restrict foreign capital or investment. It does not impose export performance or local content requirements, and allows free repatriation of profits. The Government regularly runs budget surpluses, and has amassed large fiscal reserves. The corporate profits tax is 16.5 percent, and personal income is taxed at a maximum rate of 15 percent.
Property is taxed.
Interest, royalties, dividends, capital gains and sales are not. Government spending has grown from approximately 14 percent of GDP in the mid 1980s to about 19 percent by the early 1990s. Because monetary policy is tied to maintaining the nominal exchange rate linked to the U.S. dollar, Hong Kong's monetary aggregates have effectively been demand determined. The Hong Kong Monetary Authority, responding to market pressures, occasionally adjusts liquidity through interest rate changes and intervention in the foreign exchange and money markets. China assumed responsibilities for Hong Kong's foreign affairs and defense, but Hong Kong remains a separate customs territory with a high degree of economic autonomy.