Hong Kong faces £15 million tax bill: CEN 2.12.10 p 8. February 21, 2010
Posted by geoconger in Church of England Newspaper, Hong Kong Sheng Kung Hui.trackback
The Diocese of Hong Kong has been hit with a £15 million tax bill after a court ruled that its profits from the development of church land were not part of the church’s charitable activities.
The Jan 27 ruling comes as a blow to the diocese, which now must pay taxes on the future income from its property ventures, and will likely impact the Anglican Consultative Council, which had received grants from Hong Kong to support its operations.
In 1998 the diocese formed a joint venture with Cheung Kong Holdings to develop St Christopher’s Orphanage located in Tai Po in Hong Kong’s New Territories into luxury condominiums. The sale of the land generated a profit of £37 million, while the Sheng Kung Hui Foundation, which manages church properties, earned £55 million on the sale.
High Court Justice Anselmo Reyes rejected the argument proffered by church counsel Anthony Neoh that neither the diocese nor its trust arm was empowered to engage in business.
In his opinion Judge Reyes wrote the existence of a prohibition against business activities in the diocese’s charter did not by itself “preclude an investigation into fact or falsify the [tax authority’s] conclusion.”
“Read in context, all that the [Inland Revenue] was saying is that the church and the foundation had a laudable motive of using as much of the income generated from the old lots as possible in their charitable activities.”
“That does not mean that, at the end of the day, all the income generated was expended on charitable activities,” Judge Reyes said, “nor does it say anything about how much of the income generated was actually used in charitable activities.”
In its original ruling the Inland Revenue Department said the diocese had not provided for an accounting of the profits, and noted that one of the conditions for tax exempt treatment of the profits was that they not be “expended substantially outside Hong Kong.” At ACC-14 in Kingston in 2009, ACC General Secretary Kenneth Kearon reported an “extraordinary gift” from the Hong Kong Anglican Church, which forgave a £500,000 loan that it had extended in 2005 towards the refurbishment of the offices of the ACC at St. Andrew’s House in London.
Attorneys for the diocese are reviewing the ruling and no decision has been made on an appeal at this time, a spokesman said.
