• Wed
  • Nov 19, 2014
  • Updated: 8:58pm
NewsHong Kong
EDUCATION

Tax-free status of Hong Kong’s international schools attacked

Granting of charity status criticised after parent company of international school in Lam Tin is found to be listed on New York Stock Exchange

PUBLISHED : Monday, 02 June, 2014, 11:37pm
UPDATED : Tuesday, 03 June, 2014, 7:28am
 

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Hong Kong's charity rules have come under fire after it was revealed the parent company of an international school is listed on the New York Stock Exchange.

The Nord Anglia school in Lam Tin is registered as a charity under section 88 of the Inland Revenue Ordinance, meaning it is exempted from tax.

It also qualified for the government's land grant scheme, under which international schools are given sites for a nominal fee, usually of about HK$1,000.

But the South China Morning Post has discovered that its Hong Kong-based parent company, Nord Anglia Education, has been listed on the New York Stock Exchange since March 28.

David Bishop, a company law specialist at the University of Hong Kong, said the government should not grant "a blanket tax exemption" to all schools, especially those too expensive to benefit most people.

He also said a law was needed requiring charities to operate transparently.

"Almost all educational institutions in Hong Kong are taxexempted, but they make a ton of money," Bishop said.

"The charity regulations here are ridiculous. There are many examples where international schools are given unequal treatment and tax exemption. It is completely unfair."

Nord Anglia School Hong Kong, the sponsoring body of Nord Anglia International School Hong Kong, was registered as a charity on April 9 last year and was granted the Lam Tin site two days later.

It will offer 400 places for Year 1 to 7 pupils in September, with Years 8 and 9 to be added next year. It charges an annual tuition fee of HK$131,800 per child from Year 1 to 6 and HK$147,000 for Year 7, in addition to non-refundable fees of HK$84,000 for applications, interview and assessment and place confirmation.

It also offers individual and corporate debentures costing from HK$400,000 to HK$5 million per child.

Accountancy sector lawmaker Kenneth Leung said a new law was needed to define how charities should operate and how they should use money they raise. This might prevent expensive international schools that benefit only a few from registering as charities, he said.

Civic Party legislator Dr Kenneth Chan Ka-lok was concerned Nord Anglia Education would be accountable only to its shareholders and would not focus on the quality of its teaching.

Richard Barton, a spokesman for Nord Anglia Education, said the group informed the government of its listing in February.

"We will be subject to a yearly audit to ensure that we continue to be section 88 compliant," Barton said. "We fully recognise that if it is not successful, we have to remedy it or we will lose the site. The rules are very clear."

An Education Bureau spokeswoman said the bureau would "closely monitor the activities of the school sponsoring body and the school to ensure its compliance with the service agreement" with the government.

Since 2006, 13 sites have been allocated to international schools. The government introduced six greenfield sites and vacant schools in March for international school development.

In July last year, a heritage site on Mount Davis was granted to the University of Chicago Booth School of Business for 10 years for a one-off premium of HK$1,000.

Meanwhile, St Margaret's Girls' College in Sheung Wan, a secondary school popular for its low fees and multicultural education, is facing closure because it cannot afford the rocketing rent of more than HK$400,000 a month.

In a report released in December last year, the Law Reform Commission stepped back from its recommendation of a centralised charity authority.

It said changes could be implemented by amending existing legislation rather than through the creation of a new law.

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This article is now closed to comments

HK-Explorer
Hong Kong has a massive shortage of international schools!! Hong Kong is having trouble attracting high quality talent and is at the risk of losing the talent it has to places like Singapore, Shanghai and other Asian tigers.
The parents of the kids who attend these schools pay taxes to the government. The government needs to provide education to these children. If the kids were to go to a local Hong Kong school the government would have to cover the value of the land, cost of building the school and the cost of running the school.
By giving land to have others build and fund the school the average tax payer is the big winner for now an every year to come.
Hong Kong needs to get its priorities straight and start focusing on ensuring there are plentiful international schools and high quality local schools. All the $$ being saved by not having to fund private school children should be pummeled into local schools to improve them.
Lets get computers, laptops and tablets into local schools. Lets have the government start hiring English teachers from Canada, UK, US by the hundreds and offer a similar English experience as international schools (along with the Chinese). Lets have the government make a commitment that students in primary schools will graduate high school fluent in English and Chinese.
Lets get going on this as HK has the money just lacking the will.
HK-Explorer
One cannot expect that HK can provide the best education for locals and expacts by expecting schools are run as cheaply as possible. If we want the best talent we need to focus on getting the best education like Korea, Japan and Singapore are doing.
HK government needs to subsidize top education to be innovative and get back to the place of prominence in Asia.
markyu
The last point regarding St. Margeret's Girl's College financial problems is in stark contrast to the 'free' provision of land to expensive international schools.
How does an international school charge more for school fees when they don't need to pay for land rent at all?
Why can't local schools be exempt from such costs then?
Level playing field NOT.
Consider the numerous constraints the EDB places on local schools.
How About
All international schools should pay the full government rates and rents and not be exempt from paying corporation tax. Let's start with this one.
.
This is an area CY Leung's team can consider a review and remedy - the ED EMB 'bridgehead' has survived decades of reforms by various generations of ministers, so much so that it is presumed "un-reformable". So instead of dealing with the existing stream of schools, nearly every parent voted by enrolling in International schools. Something must be done about the ED.
.
ABCDEFG
Right, so the listing was already known. The school is aware that they need to conform with the local rules for charities and they had informed the government about the listing and the government has taken appropriate measures. Actually at information sessions, the school have been very open about the listing. The sensationalist headline is not worthy of any serious newspaper. Poor reporting SCMP.
rawlie
I've been saying for years, if you send your kid to an international school, you're saving the government about $45,000 per secondary school child whilst not only paying double / treble that in fees, but are also paying for other people's kids to be educated through your tax dollars! Of course if you're in the top 5 percent, or a senior civil servant who gets their kids educated for free at international schools, then who cares? But, if like Johnny Tsang and you are in the aspirational 'middle class', then I guess we just have to bend over and the exorbitant fees and non-existent tax breaks.
pragmatist
Scandolous shameful for the moral(??) School and competent(??) Government!
exellent work by scmp is continuing to expose the crumbling education system here.
too many culprits - awful local schools, foreign companies who cause inflation in fees with their ridiculous expat packages that are insensitive to fees, and money-chasing businesses who call themselves schools.
hurting children's education is a social crime.
dlplaw
Land is granted free to the schools. School fees are paid to management companies which keeps the profit. This destroys the spirit of granting fee land to the schools. Is the government too dumb or turning a blind eye?
allan94
Firstly, HK needs MORE international schools, not less. In HK today, there is no discrimination in enrolling, the only differentiator is money, ie if u have money, your kid can attend. There is clearly a demand for intl schools by local kids, look at the 50% number of local kids in intl schools. Those locals who are angry focus on the subsidy of fees. Go ahead and remove the subsidy, let the intl schools charge full fees. The demand for intl schools will NOT waver! The fact of the matter is, HK's local schools are SO bad. If we want to fight on this issue, we should demand from the govt to upgrade the local schools. The fault is NT with the intl schools, who are basically meeting a strong demand. I would NEVER send my kids to a local school, even if they double the fees of intl schools overnite. If i cant afford it one day, ill rather relocate. HK's local schools are SO bad, just talk to any high school student today....u wll be appalled at the lack of basic skills in language (except cantonese), presentation, confidence, logic and creativity.
22gt7
Although one of the charitable purposes includes advancement of education according to the judgement of Lord MacNaghten (3TC53), the listing of the parent company on the NY Stock Exchange clearly violates the clause prohibiting distribution of its incomes (coming from profits of subsidiary as dividend) amongst its members. If this is the case, the School should not be exempt from tax according to Section 88 of the Inland Revenue Ordinance. Has SCMP asked The Taxation Institute of Hong Kong for their views on this matter?

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