The Beginning and the End of an Era of Charitable Public Benefit in Hong Kong

As with the UK Charities Act 2006 ('CA 2006'), the presumption of charitable public benefit will likely cease when the Charities Ordinance (“CO”) comes into force in Hong Kong. The reference to the United Kingdom is important in the formulation of the organizing principles of public benefit; this is because the common law cases previously applied in Hong Kong continued to sustain in Hong Kong after the 1997 handover. However, common law cases after 1997 may reflect a different direction. This paper illustrates two things relevant to charitable public benefit. First, it argues against the presumption test in Hong Kong from a comparative perspective, and the present Hong Kong tax policy is compatible with previous English common law cases. Against this comparative background, the author asks how public benefit should be modified in accordance with Hong Kong's tax policy. Secondly, it consolidates the principles of relation, deference, and against capriciousness into the organizing principle of the public benefit test. This organizing principle is subject to the paramount principle of tax distribution. With the new CO in Hong Kong, the four headings of charitable purpose under Lord MacNaughten's formulation in the Special Commissioners of Income Tax v Pemsel case will become obsolete. The public benefit test will thereafter reverse the presumption of charitable purpose and create a new regulatory regime. The public benefit test will become a paramount means of assessment for market entry. No entity will be regarded as a legal charity unless it satisfies the public benefit test. This controls the market entry on charitable trust that financial institutions enjoyed in the past.