Moving our charities on from Elizabethan times
In mid-June, the Law Reform Commission published its proposals for the reform of Hong Kong's charity law. Most of the existing law is case law rather than statute law and, incredibly, derives from an Act of Parliament passed during the reign of Queen Elizabeth I in 1601.
The commission's sub-committee looked at common law jurisdictions around the world and its proposals are a distillation of what has worked in those jurisdictions but tailored to Hong Kong's circumstances.
What comes through loud and clear in the report is that while Hongkongers are undoubtedly generous (Hong Kong has over 5,000 registered charities, which raised approximately HK$8 billion in the 2008-2009 fiscal year, according to the commission), they are also canny with their money. In other words, they want to be sure that good causes will benefit from their donations.
This is entirely as it should be. Recognition as a charity brings with it valuable tax exemptions. Not only are recognised charities themselves exempt from Hong Kong tax, donors themselves get valuable tax breaks. The community therefore has a stake in ensuring that value is delivered in exchange for these concessions.
The report also represents an opportunity for our wealthier citizens to consider establishing their own charitable foundations. Indeed, Hong Kong could become a regional philanthropy centre using Hong Kong charitable entities, supported by our highly developed financial services sector, to improve the lives of many in the region who are less fortunate, especially on the mainland.
The commission has put forward proposals designed to give charities a legal regime appropriate for a modern city state in the 21st century. First, they suggest that the existing and rather restricted definition of charity be replaced by a more up-to-date list of 13 charitable purposes including arts, culture, the environment and the promotion of religious or racial harmony.
The report also proposed the establishment of a charity commission to regulate the sector. This would be a one-stop shop and the sole regulator of charities replacing the various government departments that are now charged with the task.
The new commission would be simple and more streamlined. It would have powers of investigation to monitor charities and to ensure that they keep within the law. If necessary, it could deregister charities and the relevant trustees could also face suspension or removal from office.
The sub-committee is to be congratulated for producing a thorough and well balanced report that may well last as many centuries as that ancient English statute of Elizabeth I.
Patrick Hamlin is Of Counsel with Withers Hong Kong