Does PRC collect taxes from Hong Kong?
Does PRC pay for the development of Hong Kong or contribute to the annual budget of Hong Kong?
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1Going back 10-20 years ago, HK was a major entry point for attracting world capital and economic know-how to China. Nowadays, with mainland China much more dynamic, that has probably lessened HK's importance in that regard. And with HK's ongoing repression by China, its attractiveness to multinationals is likely fading even more.– Italian Philosophers 4 MonicaOct 24, 2022 at 22:19
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1 Answer
Although the title of your question mentions the economic relationship between the PRC and Hong Kong, from the body it seems that what you're actually interested in is the fiscal relationship between the two. Accordingly, that is what I'll discuss in this answer, fortunately it is much simpler to understand, than the economic relationship.
On the question of whether the People's Central Government (PCG) collects taxes from Hong Kong, let's first refer to Chapter 5 of the Basic Law of Hong Kong. Article 106 states that,
The Hong Kong Special Administrative Region shall have independent finances.
The Hong Kong Special Administrative Region shall use its financial revenues exclusively for its own purposes, and they shall not be handed over to the Central People's Government.
The Central People's Government shall not levy taxes in the Hong Kong Special Administrative Region.
I searched around to see if I could find anyone suggesting that Article 106 had been violated, but wasn't able to find anything. That not withstanding, we can take a look at the most recent report on the Hong Kong government's expenditure. You can peruse it yourself, but I wasn't able to see anything indicating that the Hong Kong government had sent any money to the CPG, with one possible exception. On p. 25 of the report you will see the item "Non-recurrent appropriation to a special fund to meet the expenditure for safeguarding national security" which totals $8bn in the financial year 2020-2021 only. The report also contains this explanatory note for this item,
The Law of the People's Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region provides that the Financial Secretary of the Hong Kong Special Administrative Region shall, upon approval of the Chief Executive, appropriate from the general revenue a special fund to meet the expenditure for safeguarding national security and approve the establishment of relevant posts, which are not subject to any restrictions in the relevant provisions of the laws in force in the Region. This $8 billion provision is the above-mentioned special fund for meeting the expenditure for safeguarding national security in the coming years.
Seeking further clarification on the nature of this expenditure, I came across this article on the website of the Hong Kong government. It contains the, rather unhelpful passage,
It [the Hong Kong government] added that according to Article 14 of the National Security Law, no institution, organisation or individual in the Hong Kong SAR shall interfere with the work of the Committee for Safeguarding National Security of the Hong Kong SAR, and information relating to the committee's work shall not be subject to disclosure. Therefore, no further information regarding the fund will be provided.
However, the article also states that the "office for safeguarding national security" which the CPG established in Hong Kong is funded by the CPG. So, on the basis that they are willing to pay for this, it seems at least plausible that $8bn is for use by the Hong Kong government, and was not transferred to the CPG, but the actual situation isn't clear at present.
Moving on to what financial contributions the CPG makes to the development or budget of Hong Kong, we can examine the latest summary of government revenues. Nothing stands out as being a transfer from the CPG. I also looked at the detailed breakdown of revenue by type, which you can do at your leisure, and still wasn't able to see anything that looked like a transfer from the CPG. It therefore seems that the CPG does not contribute (or at least, not significantly) to the Hong Kong government's annual budget. However, as far as I can tell, there is no actual law that prevents this, the CPG simply chooses not to do so.
Even so, one could argue that Hong Kong receives some "benefit in kind" from the CPG. For example, the military defence of Hong Kong is the responsibility of the People's Liberation Army, which is funded entirely by the CPG. There are other, similar, cases, but since their benefit to Hong Kong is a bit nebulous, I won't discuss them further.
