Chen Fashu, president of Newhuadu Industrial Group, allocated 8.3 billion yuan ($1.2 billion) worth of securities to set up Newhuadu Charity Foundation on Tuesday. But the public has not welcomed the charity because it might have been established to evade tax, says an article in Xiaoxiang Morning Herald. Excerpts:
The setting up of Newhuadu Charity Foundation, believed to be the largest of its kind in the country, has been greeted by suspicious silence.
The reason for that is obvious. The source of the charity's fund is reportedly the stocks of Newhuadu Industrial Group president Chen Fashu, who is suspected of evading taxes.
Plus, the foundation is supposed to function on the lines of Gates Foundation.
Earlier this year, Chen sold his shareholdings in ZiJin Mining Group for 2.7 trillion yuan, creating a controversy over whether he should have paid tax for his stocks. It was not until last month that Li Xin, vice-president of Newhuadu Group, clarified that Chen was not evading tax because there was a stand-over order on capital gains tax. That by no means was a convincing argument.
The Gates Foundation doesn't have a good name because like most other charitable institutions, it invests 95 percent of its funds in the market every year, and donates just 5 percent in order to evade tax.
Experts say that in foreign countries where inheritance tax is high, many rich people set up foundations only to evade tax.
With an eye on the unpredictable inheritance tax rate in China, Chen might have taken a precautionary move.
Setting up foundations should be a good thing, unless it is done to evade tax. So where is the "China's Gates Foundation" heading? We have to wait and see.