CY’s tax problem

From Australia to Hong Kong, news of CY Leung’s secret deal with UGL has hit like a bombshell. Of course, for those who know him, the news itself is not as much a surprise as that it was leaked out.

Another thing that those who know him will not have been surprised about was his reaction when asked to explain the secret deal:

“As you can imagine, we had to escalate our questions until we got some pretty fiery legal letters from his office, acknowledging receipt [of those questions] and threatening to take us to court if we publish anything”

He has a knack for threatening people with legal letters. The first question that I have is: who wrote those legal letters and who paid for them to be written? If there was any impropriety on CY Leung’s part – and it certainly seems as if there was – then this would have nothing to do with his office and, thus, the taxpayer should have nothing to do with paying for any legal advice etc. So that is worth clarifying.

While a lot of the ensuing discussion has centered around CY Leung’s fiduciary duties as director of DTZ, my second question would be about taxes. According to this piece, it seems as if he did not pay taxes on at least part of the secret payments, “saying salaries tax is applicable only to income earned in Hong Kong.”

This is news to me. According to my understanding of the relevant rules, anyone who resides in Hong Kong for more than 60 days a year is presumed to have performed the relevant services in Hong Kong. Based on my first-hand experience, the Inland Revenue will only accept that services were not performed in Hong Kong if the tax payer is able to produce documentary proof that he or she did not perform any services in Hong Kong during the subject periods.

I would hazard a guess that CY Leung cannot prove this – so the far more important question is whether he will be asked to?

It’s who watches the watchmen all over – which is really what the ongoing protests are all about, i.e. the fact that CY Leung is unaccountable to the people of Hong Kong. In other words, the real focus of the current debate is less about the exact modalities of electing leaders and more about making those leaders accountable to their constituents, rather than to Beijing.

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