Hong Kong depends, more than most economies, on property-related revenue - notably land-sales premiums, stamp duty and rates. The city's profits and salaries taxes are low, and many residents pay little or no taxes. Hence, our tax base is said to be too narrow.
Actually, property-related revenue is broadly based. When the government sells land, every citizen is contributing his or her stake in that public land to pay for public spending. And one result of economic growth, to which all workers contribute, is the appreciation of property values over time as productivity increases. Property buyers reap the benefit but pay stamp duty, rates and, for corporations, profits tax.
The predominance of property-related revenue has meant that profits and salaries taxes can stay low. That attracts individual and business enterprises, thereby generating jobs and contributing to Hong Kong's economic success.
Property-related revenue has only one major drawback: their volatility. The prices and transaction volumes of property sales - and hence the public revenue they generate - vary depending on expectations for the economy. Property-market excesses can in turn worsen economic cycles.
But the excesses are inevitably corrected. In this cyclical process, the market always returns to its equilibrium level.
Take the ratio between the price of a basic 600-sq-ft flat and the economic output per person, or gross domestic product per capita. Its average level over the past 25 years - about 10.6 - provides an indicator of that equilibrium level.