Following are a few functional facts related to money and living in Hong Kong.
1. Hong Kong has been the gateway to the Chinese market and is a major international banking and financial centre. For years, it has been ranked as the freest economy in the world governed by “positive non-interventionism” which, as far as I can tell, means that the government provides the regulations for market decisions but then stays out of it, ensuring individuals and businesses can pursue their own economic interests that lead to greater prosperity for society as a whole. Hong Kong has virtually no public deficit, rigorous anti-corruption laws, very little red tape for business and finance, a strong legal system and a modern, international financial industry.
2. Income tax in Hong Kong is 17%, the top limit for salaries over CAD$17,000 (approximately). This is one of the lowest tax rates in the world. Only salaries, business profits and property are taxed. Employers do not deduct income tax from paycheques; rather, it is the employee’s responsibility to file his/her taxes. It is a simple one-page form and you can pay your taxes on the web, in cash and even by credit card.
3. There is no sales tax. Other than alcohol and tobacco, everything is tax free. Bliss.
4. The Hong Kong dollar has been pegged to the US dollar since 1983 at the official rate of HK$7.8, so $100 HK dollars is roughly $14 Canadian. This is a bit tricky for calculations on the fly. I sometimes practice my multiplication tables in 7’s when I can’t sleep.
5. Although credit cards can be used almost everywhere, people tend to use cash in Hong Kong. It is less of a credit card-driven environment than Canada.
6. There is no mint in HK, so bank notes are issued, under the HK Monetary Authority, by the three main banks: HSBC (which stands for “Hongkong and Shanghai Banking Corporation”), Standard Chartered, and Bank of China. As a result, bank notes for each denomination look different. You will find three different kinds of HK$100 bills, for example, although all the banks use the same colour for each denomination. However, just to keep things interesting, the government makes the coins, which include cents and coins up to HK$10, plus a HK$10 bank note.
7. We are psyching up for a BIG cash outlay when we set up our permanent apartment in Hong Kong. HK is consistently ranked as one of the most expensive housing markets in the world and rents are indeed eye-popping. When we sign a rental lease, we will need to pay, up front, two months rent as a security deposit plus the first month’s rent. In addition, if we use a real estate agent (and we likely will), we will pay half a month’s rent to the agent (the landlord pays the other 50%). And on top of that, there is a government duty, called a “stamp duty”, of 0.5% of the annual rent, which is shared by the landlord and tenant. In other words, we will need to have access to tens of thousands of dollars (Canadian) in order to move into a permanent place. Yikes. Good thing those taxes are so low.
It will take us a while to see how all this plays out for us financially. We did our homework in advance of Paul’s contract negotiations, and now we hope for the best.