Low taxes may be luxury for Hong Kong, Singapore

BEFORE now, no one would have described the leaders of Hong Kong or Singapore as Asian Robin Hoods. Both cities have earned well-deserved international reputations for high efficiency and low taxes, with income taxes topping out at 15 per cent in Hong Kong and 20 per cent in Singapore. Their decades of sustained prosperity would seem proof of the virtues of trickle-down economics.

That dogma may finally be shifting, though. Clearly worried about rising inequality, Singapore's government this week announced the first increase in the top income tax rate in decades, raising levies on the richest 5 per cent of citizens. Even Hong Kong's fabled billionaires are concerned about the widening gap between haves and have-nots, which helped drive last fall's Umbrella Revolution. Li Ka-shing, Asia's richest man, has said that he's losing sleep over the issue. Henderson's Lee Shau Kee has begun donating land to non-profit organisations to build old-age homes and youth hostels.

Yet in its own Budget this week, Hong Kong resisted lifting taxes on the wealthy, instead tossing a few sweeteners at the poor and elderly, and trimming personal taxes slightly. Apparently Hong Kong Chief Executive Leung Chun-ying believes that the city can still afford to coddle its tycoons. That's an increasingly questionable assumption.