Tax evasion of the charitable

‘So when are you going to sell your apartment to me?’ Fey asked her high school friend Simon in a café. It was well known among friends that ten years ago, Simon sold his apartment to an elderly couple at a price well below the market rate. In addition, he had allowed the couple to pay him in instalments with zero interest over the span of twenty years. It was an act of charity, and owing to surging inflation and strong growth in the housing market, Simon was not getting the value of his investment.

A computing engineer by trade, Simon is the sort of person who will do anything to have a good conversation, including bringing out his best wine and tea. He seems generous and carefree. It came as a surprise, therefore, when Simon asked for a receipt for the lunch we had just had at an exclusive restaurant, with two bottles of fine wine brought from his proud collection at home. ‘My brother-in-law can reclaim it,’ he said, as if that was the most natural thing on earth.

But perhaps I should not have been surprised.

A few years ago I was asked for help by a friend of many years’ standing.

‘Fire away,’ I said. Over the years, my family and I have been on the receiving end of her kindness and generosity. Her help comes in many forms, including giving red packets of ‘lucky money’ to my parents at festive seasons, gifts which are not supposed to be turned down. And while she was studying in Sunderland, she was not only an active volunteer for her local church but donated money regularly, even though she was living on an extremely tight budget.

‘You don’t have to say yes, and whatever your decision I will fully understand it,’ my friend reassured. ‘It’s just that I wonder if some of my income could appear under your name so that my tax rate could be downgraded considerably. My accountant has done some research and found that since you do not reside in China and that the income from another country is not taxable in your adopted country, you would not be liable to pay tax for it in either.’

More recently she advised ‘you should try your best to get all your money back from the government pension scheme you used to subscribe to. Otherwise the money will disappear into the dark hole of state bureaucracy. It is better to keep the money in your own pocket than lose it to a system that is corrupt.’

I have a sense that both friends belong to a growing Chinese middle class who are becoming more charitable on the one hand, yet on the other more shrewdly aware that their money might be wastefully swallowed up by the public purse. Some of them would even use legal loopholes to claw some money back from it.