On January 26, 1841, two years into the First Opium War between China’s Qing Dynasty and the British Empire, Commodore Sir Gordon Bremer hoisted the British flag above Possession Point in Hong Kong.
At the time the island’s population numbered less than 10,000. Most were illiterate fishermen.
Hong Kong was also devoid of any meaningful natural resources except for well-placed geography.
So when the war ended in 1842 and British diplomats formally annexed Hong Kong into their empire, they turned it into a free port almost immediately.
This means that no taxes were charged on goods traded in Hong Kong – an anomaly back then.
Governments routinely squeezed trading posts for tax revenue, taking a cut of all goods shipped through the port.
Governments still do this today, charging custom duties and other taxes on imported goods crossing their borders.
As a free port, Hong Kong immediately attracted entrepreneurs and speculators from all over the world to set up their operations.
People were attracted to the low tax environment, and the fact that the imperial government bureaucrats were over 5,000 miles away.
This post was published at Sovereign Man on March 1, 2016.
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