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HK Again Ranked As Freest Economy, US's Score Falls

by Mary Swire,, Hong Kong

03 February 2016

For the 22nd consecutive year, Hong Kong has maintained its position as the world's freest economy in The Heritage Foundation's Index of Economic Freedom, while the score achieved by the United States has fallen again.

The 2016 Index of Economic Freedom ranks the degree of economic freedom in 178 economies around the world. Ten factors are assessed: business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption, and labor freedom.

Hong Kong achieved an overall score of 88.6 (on a scale from 0 to 100), a decline of one point compared with 2015, but still above Singapore's second place 87.8 score, down 1.6 points from last year. The gap between Hong Kong and Singapore actually widened slightly, after narrowing for five consecutive years.

These two jurisdictions' scores were also still significantly ahead of third-placed New Zealand (81.6), Switzerland (81.0), Australia (80.3), and Canada (78.0). The United States scored 75.4, a fall of 0.8 points, to be 11th freest in the 2016 Index. This meant it was one place below the United Kingdom, whose score improved by 0.6 points to 76.4.

Hong Kong retained top position in business freedom, trade freedom, and financial freedom. The Foundation highlighted Hong Kong's zero tariff rates and its reputation as "one of the most open economies in the world for trade and investment." It added: "The financial sector remains highly competitive and well-capitalized, serving as a leading global hub." It also recognized Hong Kong's prudent economic policy and fiscal discipline, with a low and simple tax regime.

A Government spokesperson said that the slight dip in Hong Kong's overall score was "a timely reminder that, with other regional economies progressing forward, we must keep up with the pace of global economic development closely and strive to enhance our global competitiveness."

He stressed that "the Government will continue to uphold the free market principles by providing a favorable business environment, ensuring fair competition and free trade, maintaining a simple tax regime with low tax rates, and keeping an efficient public sector."

On the other hand, the Foundation pointed out that US "economic freedom has been on a declining path over the past decade. … With losses of economic freedom in eight of the past nine years, the United States has tied its worst score ever, wiping out a decade of progress. The United States has fallen from the 6th freest economy in the world, when President Barack Obama took office."

It added that America's "self-inflicted wounds include … the highest corporate tax rate in the developed world. This has driven new jobs to other, more competitive nations and has meant fewer jobs and lower wages for Americans."

US House of Representatives Ways and Means Committee Chairman Kevin Brady (R – Texas), keynote speaker at the official release of the 2016 Index, called the US position in the Index "embarrassing" and adding that "Committee members are going to move forward to advance a tax code that's built for growth."

TAGS: tax | investment | business | capital markets | international financial centres (IFC) | tariffs | corporation tax | Australia | Singapore | United Kingdom | offshore | Canada | Hong Kong | New Zealand | Switzerland | United States | trade

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