HONG KONG (BLOOMBERG) - For 25 consecutive years, Hong Kong has remained the world's freest economy, thanks partly to low taxes and the rule of law.
But widening inequality has also fuelled the worst unrest the city has seen since the former British colony returned to China in 1997.
The lack of inheritance and capital-gains taxes, for instance, has added to the wealth of tycoons.
The combined net worth of the territory's 20 richest people including CK group founder Li Ka Shing and Mr Lee Shau Kee, the founder of Henderson Land Development Co, is pegged at US$210 billion (S$288 billion), according to the Bloomberg Billionaires Index.
By contrast, the city's income inequality, as expressed in Gini coefficient, was the most for any developed economy in 2016 at a 45-year high. About one in five residents lives below the poverty line.
In her address to lawmakers on Wednesday, Chief Executive Carrie Lam may wrestle with the topic of social inequities that are stoking the political protests since early June.
Mrs Lam is under pressure to soothe tensions and find ways to ease the housing crisis in the least-affordable market without rocking a tax regime that made Hong Kong Asia's financial hub.
"The problem in Hong Kong is many ultra-rich people earn dividends and rents without having to pay tax, while the poorest people don't have to pay tax either," said Mr Simon Lee, co-director of the International Business and Chinese Enterprise Programme at the Chinese University of Hong Kong.
"So those in the middle become really miserable."
Here's a look at the tax policies of Hong Kong:
NO CAPITAL GAINS TAX
Hong Kong, like Singapore, doesn't impose a tax on gains from the sale of investment assets.
Most other developed countries impose such taxes. Britain, for example, collects as much as 28 per cent of capital gains.
In South Korea, the levy ranges between 6 per cent and 70 per cent depending on the type of assets and holding period. In the United States, it is as much as 28 per cent.
NO DIVIDEND TAX
Hong Kong does not tax dividends from share holdings. This is also rare among developed economies.
In Japan, for example, dividends are generally taxed at about 20 per cent.
Britain charges between 7.5 per cent and 38.1 per cent depending on the dividend recipient's total taxable income.
In the US, dividends are either taxed at ordinary income-tax rates or at capital gains rates, depending on the type.
NO INHERITANCE TAX
Hong Kong abolished its inheritance tax in 2006 to promote the city as a trust and asset-management centre.
This has encouraged billionaires to park their wealth in the city. Rival Singapore also removed its estate duty in 2008.
In Britain, estates above £325,000 (S$568,000) are taxed at 40 per cent for the portion above the threshold.
In Taiwan, inheritance tax is as much as 20 per cent, while Japan's is between 10 per cent and 55 per cent, depending on the value of the estate.
NO OFFSHORE INCOME TAX
Hong Kong does not tax overseas income such as foreign investment profits and rental income on overseas properties, which not only helps multi-millionaires who hold assets around the world but also encourages foreign companies to shift tax burden via the city.
In Singapore, such income is exempted for individuals. But many other countries like Britain, the US, Australia, South Korea and Japan tax their residents' worldwide income.
FLAT PROPERTY TAX
Almost half of Hong Kong people live in rental housing. But no matter if they are renting a luxury house at the prestigious Victoria Peak or a tiny studio in the old neighbourhood of Sham Shui Po, their landlords are taxed at the same 15 per cent of rental income - good news to those renting flats out for a higher margin.
In the similarly low-tax Singapore, rental income is subject to income tax, which can reach 22 per cent on a progressive scale.
In Britain, rental profits are also subject to income tax of as much as 45 per cent, and if landlords rent out properties as a business, they need to pay an additional fee.