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

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.