Thomas Piketty, the author of the world’s bestselling Capital in the Twenty-First Century, wrote in the book: “The clear regressivity in the top centiles reflects the importance at this level (the high and low levels of tax rates) of capital income, which is largely exempt from progressive taxation.” This reveals the underlying crux of rising global wealth inequality.

Many countries are ready to raise taxes on the rich

Obviously, the fact is that the real tax rates on the affluent are so much lower than those of the general public, which has become a top priority for many countries to stay competitive in recent years, so much so that their intention to target the wealthy population has been well known. Let’s take a look at some countries that will soon levy higher taxes on the rich.

1. New Zealand

According to a report by New Zealand Inland Revenue Department, (IRD), revealed in April, the average New Zealanders pay 20.2 percent tax on all income, goods and services, compared with super rich New Zealanders paying only 9.4 percent. David Parker, Revenue Minister, said the government is seeking targeted measures.

2. Canada

The Canadian government released its federal budget plan in March meant to close tax loopholes that favour the wealthy and corporations, conduct a public review to identify federal tax expenditures, tax loopholes, and other tax avoidance mechanisms that particularly benefit to high-income individuals, the wealthy and large corporations, while putting forward proposals to eliminate or limit these expenditures.

3. United States

However, one of the most typical examples is that of the U.S. government. According to the Fiscal Year 2024 Budget in March, the Biden government proposed to levy a 25% minimum tax on billionaires on unrealized capital gains on assets such as equities. Admittedly, Biden’s proposal can find crucial problems and work on them. By doing so, those who shall still be levied on capital gain tax, even though they purchase shares.

In addition, Biden has proposed raising the capital gains tax rate to 39.6% from 20%, and increasing income levies on corporations and the affluent population. Upon implementation, wealthy Americans may be in for a capital gains tax hike.

Such an action has caused shock waves: A series of wealth tax policies on the rich in the developed countries have raised a storm of protest from top billionaires. For example, Elon Musk, the world’s richest man said that even taxing billionaires at 100 percent wouldn’t solve America’s national debt problem. For another instance, Bill Gates, the founder of Microsoft, argued that higher taxes on the wealthy would undermine social incentives and economic development.

Seemingly, the wealthy hold a strong protest on the rich tax, yet in fact they have already faced the music by taking precautions beforehand.

Global wealth shift of the rich makes Hong Kong become a “Treasure Trove”

Recently, relevant reports suggest that “global funds are flowing into Hong Kong”, “US dollar deposit business in Hong Kong has boomed”. Ms Julia Leung, the Chief Executive Officer of the Hong Kong Securities and Futures Commission, also said at the ASIFMA China Capital Markets Conference on 27 June, “indeed, our data for the first quarter show signs of hope. The licensed corporations under major investment banks saw their net profits before tax jump twofold over the previous quarter. Total income also rebounded by a high single-digit percentage.”

Likewise, on 29th June, John Lee Ka Chiu, the Chief Executive of Hong Kong Special Administrative Region (HKSAR), said in an interview with South China Morning Post that “with capital and investment returning to Hong Kong and this turnaround would be better reflected in the city’s third-quarter figures.”

Undoubtedly, these reports have highlighted the attractiveness and prospects of Hong Kong, as a leading global asset and wealth management hub. Thus it can be seen that Hong Kong is truly an “ideal destination for investment” that attract visitors from different places to engage in commercial activities.

With a large and well developed financial system, Hong Kong can fully satisfy the multiple needs for the global billionaires with a wide range of products and services such family offices, stocks, trusts, bonds, insurance, precious metals, property, and even virtual assets. Naturally, Hong Kong has become a preferred wealth management centre for ultra-high-net-worth individuals in the international context.

What makes Hong Kong so desirable?

As the city with the highest concentration of ultra-high-net-worth individuals (UHNW) in the world (more than 15,000), Hong Kong is also home to the top professional financial organisations and financial talents. On top of that, Hong Kong has many world-renowned advantages:

1. Simple and competitive tax system

Hong Kong is regarded as a “low-tax paradise” because of its narrow tax base, few tax types, low tax rates and many tax exemption policies. In particular, what billionaires most focus on no capital gains tax nor estate duty in Hong Kong.

2. The Linked Exchange Rate System

The Linked Exchange Rate System is defined as an economic approach that enables Hong Kong to effectively protect itself from external financial turbulence and political shocks. By anchoring the Hong Kong dollar to the US dollar, it can reduce exchange-rate volatility for individuals, enterprises and the government in economic activities, thereby helping reduce transaction costs while stabilizing the expectations of all parties.

3. Continuous innovation in the financial market

Recently, Hong Kong has implemented a series of positive measures, such as the launch of the network of Family Office Service Providers, the introduction of HKD-RMB dual counter, the opening of the Licensing Regime for Virtual Asset Trading Platforms and the relaunch of the Investment Immigration Program. All these efforts have proven that Hong Kong has proactively responded to the trend of development of the times while striving to satisfy the growing needs of various parties. Due to continuous innovations in the financial sector, Hong Kong has remained among the top in various areas of competitiveness in the global financial market.

Conclusion:

Against the backdrop of a complex international landscape and geopolitical tensions, Hong Kong is now playing an important role as a global wealth centre. Amid such historic opportunities, it will strive for even remarkable results in near future through continuous reform, innovation and enhancement. Like Mr Lee Ka-chiu, the Chief Executive of HKSAR, expresses great expectations that Hong Kong will definitely have huge potentials with and greater prosperity infinite splendour!