Hong Kong doing less “good”, survey finds

Hong Kong is falling behind its Asian peers in supporting charitable giving through fiscal incentives.

Harbour Times

Alex Ho

The Doing Good Index 2018, a report published this week by the Hong Kong-based think tank Centre for Asian Philanthropy and Society (CAPS), has grabbed some media attention, as it examines Asian economies’ regulatory, tax and cultural environments.

One interesting finding is that Hong Kong has a tax deduction rate for charitable donations of 35% for both individuals and corporations, ranking only 10th on a list that includes 15 Asian economies, compared with Singapore’s 250% and seven other Asian countries’ deduction rate of 100%.

Give from the heart (and your tax breaks)

Asian countries have a tradition of giving back to their families and communities. However, in recent years governments have also emerged as important influencers of private social investment through their fiscal policies, mainly in the form of tax incentives. The general consensus is that philanthropists and corporation would have more incentives to act if the government shows more signs that it will support charitable giving through fiscal incentives.

Dr. Ruth A. Shapiro, Founder and Chief Executive, Centre for Asian Philanthropy and Society, says Hong Kong could do more to encourage private social investment.

“Hong Kong could improve by taking two measures: by raising the tax deduction rates for both individuals and corporations, or by raising the tax deductible income ceiling, and reducing the processing period for charity registration from one year so that charities can cease being obliged to pay the same taxes as businesses in their first year of operation,” Shapiro told Harbour Times. “Doing this would better align Hong Kong’s approach to charities with those of other high-income economies in the region like Japan and Singapore.”

In spite of the above findings, it has been reported that Hong Kong has earmarked over HK$142 million for social enterprise investments, which is one of the more ambitious government funds in Asia.

“What the Hong Kong government does noticeably well is that it actively engages in social enterprise forums and offers funding opportunities,” said Shapiro. “The city’s social service welfare department also has a long history of offering social service grants to local charities.”

While some raised questions of tax evasion and lost of tax revenue to charitable donations, Shapiro thinks it should not be a big concern. “No significant loss of tax revenues to charities has been observed in economies that have better systems in place to provide incentives for making charitable donations,” he said. “In fact, most governments protect against the risk of tax evasion through annual financial and other reporting requirements which organizations have to meet in order to maintain its charitable status.”

However, the report also revealed that Asian philanthropists are sometimes reluctant to share their wealth with local organisations, mainly due to a lack of trust.

Transparency key

The trust issues reportedly stem from a lack of clarity and transparency over the organisations’ work and use of funds, and scandals involving them in some way.

“Most organisations that were surveyed in the study have websites, but a number of these websites are not easy to navigate and unable to clearly express the organisations’ work,” said Mehvesh Mumtaz Ahmed, director of research at CAPS.

A separate report from the city’s official auditor Audit Commission in 2017 suggested that the government’s rules on charities are questionable, as some groups are allowed to keep their tax-exempt status and free land after conducting certain activities that are not charitable-related, such as paying their directors and operating hotels and serviced apartments for commercial purposes.

To view the article on the Harbour Times‘ website, click here.