Jan 4 (Reuters) - Hong Kong remains the world's freest economy but it could jeopardise its position if it goes ahead with a goods and services tax, U.S. think-tank the Heritage Foundation said on Tuesday.

The former British colony topped the 2005 Index of Economic Freedom - published by the Heritage Foundation and the Wall Street Journal - for the 11th year running, beating Singapore into second place.

The United States dropped out of the top 10 for the first time since the index was launched 11 years ago, falling to 12th position from 10th last year, while the former Soviet republic of Estonia was commended for its progress on reforming its economy and was ranked fourth.

Hong Kong was rewarded for its low tax rates, open markets and low level of government intervention in the economy.

The foundation warned though that implementation of a goods and services tax (GST), now being considered by the government, would be a negative step unless it was accompanied by cuts in other tax rates.

Financial Secretary Henry Tang is expected to announce in his March budget whether the government will proceed with a public consultation on a GST. The tax could take three years to implement and Tang has hinted that other taxes could be reduced to offset the burden of a new tax.

Meanwhile, although the business environment in the U.S. has been stable over the past four years it is being held back by government trade policy, which uses anti-dumping rules to keep out imports, the foundation said.

Estonia's implementation of significant market reforms, including a flat tax rate, as well as fiscal discipline, has made it the most competitive business environment in Central and Eastern Europe, enabling it to compete with larger countries in the European Union, the foundation said.

The Index of Economic Freedom ranked 155 countries. China climbed to 112th place, from 128 last year, as the country has reduced tariff barriers since joining the World Trade Organisation, cut government expenditure and privatised some companies. India was not far behind at 118.

The countries with least economic freedom, according to the foundation, were Myanmar and North Korea.

[Main][News Archieve][Top]

NCGUB Information Office
77 South Washington Street, Suite 308, Rockville, Maryland 20850, U.S.A., Tel: 301-424-4810 301, Fax: 301-424-4812
Email NCGUB or Web Editor