MY TAKE
My Take
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Some charities are taking taxpayers for a ride

Generous land grants have allowed some institutions to make vast profits running businesses such as hotels, while receiving grants from the public coffers at the same time

PUBLISHED : Thursday, 29 June, 2017, 1:34am
UPDATED : Thursday, 29 June, 2017, 1:34am

The city’s regulation of charities is so full of loopholes that some are able to maintain their tax-free status while running hotels, rental apartments and commercial offices at a huge profit and paying directors handsome fees.

This gravy train has been going on for years. Hopefully, the new government will start to make them pay or, at the very least, stop paying those groups multimillion-dollar grants every year with no strings attached.

Hong Kong charities face stricter rules on tax and land perks after loophole revelations

According to the government auditor, our taxmen are slow to review tax-exempt status of such charities; and the Lands Department has been generous in granting free or heavily discounted sites with enormous profit potential.

The Home Affairs Bureau, which has ultimate responsibility, has been sitting on its hands.

In a positive sign, home affairs chief Lau Kong-wah has admitted to such “inadequacies” and agreed to review subsidies for the Scout Association, which has been one of the more egregious cases. But it is by no means the only one.

The association owns its headquarters and a hotel in the same complex on Austin Road in Jordan, through a land grant in 1989 at a heavily discounted price of HK$30 million.

According to the Audit Commission, the government has given the association HK$300 million in the past two decades but the charity made a net profit of HK$829 million between 1994 and 2012. It hardly looks like it needs any public subvention at all.

Lau has now agreed to review and possibly reduce its funding. Let’s see how far he will go when he continues in his post in the new government under Carrie Lam Cheng Yuet-ngor.

But don’t just pick on the Scout Association. According to the auditor’s report, at least 14 other sites granted to non-profit charities have been used to operate hotels, hostels and/or serviced apartments. Because of the loose terms under which those sites were granted, regulatory oversight has been minimal to non-existent.

Rules for Hong Kong charities must be tightened to maintain public faith

Director of Lands Bernadette Linn Hon-ho said there was little officials could do about it if they had followed land grant conditions. But the bureau and the Social Welfare Department can always cut the grants in proportion to the profits they make.

After all, the justification for giving charities preferential land leases or grants is not to hand them a blank cheque, but to enable them to be financially self-sufficient.