To lure Hong Kongers, let’s import their system20 July 2020
Article by Nicholas Tam
Making Darwin a charter city ruled by Hong Kong’s pro-prosperity legal framework would eradicate at least some of the regulatory complexity stifling Australia’s economy.
When Commodore Gordon Bremer raised the Union Flag at Hong Kong’s Possession Point in 1841, few imagined that the meagre war prize dismissed by Lord Palmerston as a “barren island with barely a house upon it” would one day capture the world’s imagination as a cosmopolitan economic powerhouse.
Bereft of natural resources and blessed with only a beautiful harbour, British institutions, and Cantonese industriousness, Hong Kong’s evolution into a global hub for aviation, dispute resolution, finance, and shipping is a compelling story of prosperity against the odds.
Modest tax reductions and tweaks to the regulatory leviathan proposed by Senator Andrew Bragg will not suffice to replicate Hong Kong’s entrepreneurial dynamism. Senator Andrew Bragg is therefore correct to observe that Hong Kong’s success should inspire policymakers interested in improving Australia’s global competitiveness. However, the modest tax reductions and tweaks to the regulatory leviathan he proposes will not suffice to replicate Hong Kong’s entrepreneurial dynamism. Australia’s current economic framework could not be more different to Hong Kong’s philosophy of positive non-interventionism.
Aside from capping personal income tax at 15 per cent, company tax at 16.5 per cent, and levying zero tax on capital gains and dividends, an important element in Hong Kong’s success has been the simplicity of its legal framework.
For instance, every tax levied in Hong Kong is consolidated in its 861-page Inland Revenue Ordinance. By contrast, Australian income tax alone is an incomprehensible gobbledegook slovenly sprawled across the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, and Taxation Administration Act 1953 contained in 22 volumes totalling 8740 pages.
This, of course, does not account for the countless regulations and guidance notes promulgated thereto. This culture of prolix legislative drafting, over-taxation and over-regulation, enriches the job-killing bureaucrats who administer it and the army of lawyers and accountants who struggle to understand it but discourages the rest of society seeking to produce wealth.
Our archaic employment law framework seemingly competes with our oppressive tax system to inflict the greatest economic and legal misery. What else can explain the quagmire of the unintelligible industrial awards which cause even the most well-advised large corporations and the government-owned ABC to become unwitting wage thieves to the tune of millions where, in most cases, neither employer nor employee realised there had been a legal breach?
Why would entrepreneurs accustomed to the flexibility of common law contracts and the ability to easily ascertain the contractual price payable choose to locate in Australia where the latter is a byzantine task that, in the case of Woolworths, took a decade to discover?
Nor does one build an entrepreneurial culture with the world’s highest minimum wage and a penalty rates regime which sees Brunswick baristas working Sundays paid more than the Banco Court barristers of the wig and gown variety, who, as Woolworths’ well-remunerated advisers Ashurst showed, are probably illegally underpaid too!
Australia’s current economic framework could not be more different to the philosophy of positive non-interventionism pioneered by Hong Kong’s revered former financial secretary, Sir John Cowperthwaite. Appointed in 1961, Cowperthwaite famously prevented Hong Kong from following the Mother Country into the hellish vortex of the Keynesian welfare state that was de rigeur amongst Whitehall civil servants of the time by refusing to collect economic statistics.
This deft move inhibited the creation of grandiose five-year plans and the usual devices of bureaucratic meddling in the economy, which prompted Milton Friedman’s famous observation that “to see capitalism in action, go to Hong Kong”.
Does anyone really expect Australia to attract mobile international capital with the woke bureaucratic burdens imposed by gender equality reporting, modern slavery statements, and a stock exchange which once demanded companies justify their nebulous “social licence” to operate?
It might be easier for Canberra to simply use the territories power to designate Darwin or a greenfield site on the Northern Territory coast as a charter city in order to build a pro-prosperity legal and tax system from scratch, which would also be geographically closer to Asia.
To simplify and expedite the quest for the regulatory alignment Bragg identifies as conducive to luring financial institutions to Australia, one could import the Hong Kong legal framework wholesale and declare that the charter city applies the law of Hong Kong as at 29 June, 2020, until otherwise amended (thus excluding China’s national security law), in the same way that Australia’s Indian Ocean territories apply Singaporean law as at the time of their transfer in the 1950s.
First theorised by former World Bank chief economist Paul Romer in 2009, charter cities returned to the headlines after Hong Kong entrepreneur Ivan Ko recently commenced negotiations to build one in Ireland.
An Australian charter city would swiftly eradicate the policy detritus suffocating our economy and turbocharge the dream of developing northern Australia.
correct to observe that Hong Kong’s success should inspire policymakers interested in improving Australia’s global competitiveness.