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(Source : Government Information Centre)

IRD explains review of charitable groups' tax exemption status


Acting Deputy Commissioner of Inland Revenue, Mrs Alice Lau, said today (February 6) that the purpose of reviewing the tax exemption status of charitable institutions is to ascertain whether the services provided and activities carried out by them are compatible with their charitable objects.

Whether these activities are in support of the Government is not a factor of consideration by the Inland Revenue Department(IRD). Organisations are free to undertake any activities, which is irrelevant to the work of the department nor is the purpose of the reviews.

Speaking on a radio programme this morning, Mrs Lau pointed out that under the tax guidelines which have been adopted for a long time, 'the attainment of political object' has been ruled by the court to be not a charitable purpose. However, she stressed that the charitable status of an institution would not necessarily be removed because it has taken part in some political activities. Any decision would be made in the light of whether the activities are related to the charitable objects of these institutions.

In the past three years, of the 207 cases in which institutions and trusts with their charitable status were removed as a result of the reviews, none were withdrawn because they had engaged in political activities which are not regarded as charitable.

"In general, the majority of these cases are related to dormancy, irregularity of donation receipts and failure to submit annual reports and accounts," Mrs Lau said.

When asked on why not all charitable institutions were questioned on their tax exemption status, Mrs Lau said that the IRD reviewed the status of charitable institutions once every few (currently about four) years. If the activities undertaken by the institutions as shown in their annual reports and accounts are compatible with their charitable objects, there is no need for follow-up actions. The IRD will follow up only on those cases which require clarifications. Such practice applies to all cases.

On the definition of "Charity", the judgment of Lord MacNaghten in the case of Pemsel is regarded by the IRD as an authoritative summary of the purposes that may be accepted as charitable, including (1) relief of poverty; (2) advancement of education; (3) advancement of religion; and (4) other purposes of a charitable nature beneficial to the community not falling under any of the preceding heads.

End/Tuesday, February 6, 2001