‘Grave concern’ over money owed by rule-breaking Hong Kong charities out of reach of tax authorities
Lawmakers call inability of city authorities to overturn tax-exempt status of charities ‘unacceptable’
Hong Kong lawmakers on Wednesday expressed “grave concern” over the inability of city authorities to overturn the tax-exempt status of charities that breach registration rules.
They said tax officials’ lack of power to claw back money owed by such organisations was an “unacceptable” situation which had resulted in serious regulatory problems.
The conclusion was reached by the Hong Kong legislature’s Public Accounts Committee (PAC) in its latest report unveiled on Wednesday. The report was a response to an investigation by government auditors last year that highlighted how the city’s rules on charities were riddled with loopholes.
According to the report, the number of charitable organisations recognised as tax-exempt under section 88 of the Inland Revenue Ordinance doubled in the decade up to 2016, from 4,435 to 8,923.
Donations eligible for tax deductions under the law soared 126 per cent between the 2005-06 financial year and 2014-15, from HK$5.25 billion to HK$11.84 billion. The tax revenue forgone amounted to HK$1.5 billion.
The Inland Revenue Department has come under fire from critics who said it had failed to ensure it had the power to fulfil its role as gatekeeper to such tax privileges.