Government to add $40,000 fine to political donations law, closing NZ First Foundation ‘loophole’

Justice Minister Kiritapu Allan has detailed a draft electoral law amendment that will close a political donations “loophole”.

ROBERT KITCHIN/Stuff

Justice Minister Kiritapu Allan has detailed a draft electoral law amendment that will close a political donations “loophole”.

Justice Minister Kiri Allan says a ‘loophole’ in political donations law revealed by New Zealand First Foundation case will be closed by a change of law.

Allan on Thursday announced the government’s latest planned changes to the Elections Act, including changing the definition of “donation to a party” and adding a new offense with a maximum fine of $40,000.

“Without this change, an opportunity may exist for political parties to structure their financial affairs in a way that allows them to legally avoid having to disclose their political donations,” Allan said in a statement.

“It is important to resolve this problem before the 2023 general election. Donations are a legitimate form of political participation, but it is also important that there is transparency and that the public knows who makes significant donations to political parties.

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Last month, the government promised to close the “loophole” that emerged after a High Court has found two men not guilty of having obtained by deception.

The men, whose names have been removed, were linked to a trust, the NZ First Foundation, which collected donations to support NZ First which were not publicly recorded as party donations by the party.

Judge Pheroze Jagose ruled that the donations collected were not party donations as defined by electoral law, as the men were not involved in the governance or management of the party.

“These amendments provide a narrow and targeted solution to the flaw identified in the recent High Court decision,” Allan said.

The amendments would redefine a “party donation” as “when a person makes a donation to a political party or other person with the intention that the donation be for the benefit of the party”.

Green Party spokesman for justice Golriz Ghahraman wants the government to go further in reforming the electoral law.

ROBERT KITCHIN/Stuff

Green Party spokesman for justice Golriz Ghahraman wants the government to go further in reforming the electoral law.

The law already requires a person who receives a donation for a candidate or party to return that donation within 10 days – however, there has been no breach of law if this deadline is not met.

A new offense for this will be created, punishable by a maximum fine of $40,000.

The changes will be introduced in the House as part of an ongoing electoral law reform bill that the government has pushed forward. Other electoral law reforms require public disclosure of donors providing more than $5,000 to political parties, raising the current $15,000 threshold.

Prime Minister Jacinda Ardern said the government would seek all-party support to close the loophole in the law on donations.

Green Party justice spokesman Golriz Ghahraman said it was good to close the loophole, but “the problem is not solved”.

“Action to improve the transparency of our political donation regime is simply too important to drop the box,” she said.

“The law still protects donations from disclosure if they are first turned over to the Electoral Commission. When this happens, the commission is able to release donations – regardless of the amount – anonymously to political parties.

Ghahraman said his own bill to amend the electoral law would also correct this “loophole”.

National Justice Party spokesman Paul Goldsmith said his party would support the amendment, but not the government’s comprehensive electoral reform bill.

“The court result seemed to open that door…if it does [that it’s a loophole] so that’s not Parliament’s intention, so it’s fair to correct that.

“We support that, but we don’t support the broader bill they are pushing through before the broader election law review they have underway.”

ACT party leader David Seymour said his party would vote for the amendment to indicate support for closing the loophole, but would vote against the entire bill.

“We do not support Labor trying to hide sensible technical change to close a loophole, amid their unilateral and hasty legislative attack on ACT and National.”

He said the government should have passed a separate law closing the loophole, as a matter of urgency, the week of the High Court ruling.