Amidst Hong Kong’s sea of high-rise structures stands a 41-story leviathan. The building, which houses China’s Liaison Office, is known to local residents as the Communist Party’s headquarters in Hong Kong, and, to some degree, this has made it ground zero for protesters in recent months.
But the building is also viewed as something more sinister; to them. It’s proof-positive of the existence of a fast-rising, party-controlled, real estate empire that’s being used for political ends. The party’s critics and the pro-democracy lawmakers of Hong Kong argue that there’s an unsettling lack of transparency in the manner by which the Liaison Office spends its money. Indeed, they maintain that Hong Kong Chief Executive Carrie Lam owes everyone an explanation as to why her administration furnished the Liaison Office with millions of dollars worth of tax exemptions on real estate deals that they contend required further scrutiny.
According to Hong Kong’s revenue department, the office in question, as well as the various subsidiary companies under it, received north of HK$206.5 million ($27 million) in tax exemptions for approximately 91 real estate transactions they engaged in since 2012. All of which, unsurprisingly, happened before pro-democracy protests broke out in June.
The sums of money mentioned above aren’t all that significant, considering that credit reports show Hong Kong has among the priciest real estate properties in the world. But in a city where its people are struggling to acquire homes of their own, and at a time when there is mass displeasure for the mainland’s political and economic grip, the perceived double standards of the current administration is hitting a nerve. And in July, thousands of protesters encircled the Liaison office’s main entrance to express their displeasure by throwing eggs and ink.
They are “interfering with everything: local elections, every part of the administration, real estate, too,” says Martin Lee, a founding member of Hong Kong’s opposition Democratic Party.
According to Christine Loh, author of Underground Front: The Chinese Communist Party in Hong Kong, the Liaison office has been around for over two decades. Indeed, Loh says that its predecessors operated clandestinely since the late 1930s, first as a tea company, and then later as the Xinhua News Agency.
In 2000, when the Liaison Office was formally set up, it started working from behind the curtain, shaping Hong Kong politics in an attempt to bend it to the Communist Party’s will, all despite China’s assurances that it will give Hong Kong a high degree of autonomy under the “one country, two systems” principle.
The Liaison Office, in recent years, is also said to have steadily increased, through a network of subsidiary companies, the number of businesses under its control.
Among all the assets and investments under the Liaison Office’s control, however, real estate remains the biggest, and arguably the most valuable. Indeed, even a conservative estimate based on relevant documents in the Hong Kong Land Registry shows that the Liaison Office owns a piece of more than 20 buildings spread all over the city. Among these real estate properties, which have mostly been acquired before Hong Kong’s handover to China, are extravagant apartment buildings and office towers.
Newman Investment, a supposedly private company whose shareholders are, in one way or another, verifiably well-entrenched with the Liaison Office, has ownership of many real estate properties that are believed to be under the control of the Liaison Office. Interestingly enough, Newman Investment’s real estate purchases were granted an exemption that allowed it to avoid paying taxes worth 30% of a property’s value.
Pro-democracy lawmakers, needless to say, discuss that Hong Kong’s arrangement with the Liaison Office lacks any semblance of transparency. They say that Lam’s administration needs to give a full accounting of these tax exemptions, and an explanation of why they were given in the first place.
“This is about taxation and whether exemptions are reasonable or not, but we have no idea on what criteria the chief executive bases the exemptions,” says Tanya Chan, a founding member of the city’s Civic Party.
Jeremy Tam, who is Chan’s colleague and fellow Civic Party lawmaker, reiterated, to his credit, the call for more transparency. He said he intends to outright ban the Liaison Office from profiting off of the tax-exempt properties it’s been able to acquire. “If there’s no transparency, then how would we know [if something unlawful occurred]?” Tam said.
Based on Materials from Bloomberg
Photo Sources: Mia Xia, IQRemix, Flickr