The government consults on the crackdown on political donations


After a string of high-profile political donation scandals, Kiwis are asked to give their opinion on a short-term overhaul of the current system

The government has quietly laid out its plans to overhaul the country’s political donation regime, with disclosure thresholds to be lowered and an outright ban on anonymous donations being considered.

The proposed reforms follow a string of high-profile donation scandals, with Labor, National and New Zealand First, all linked to Serious Fraud Office lawsuits.

In October, Justice Minister Kris Faafoi said the government “seeks to improve the transparency of political donations” in time for the 2023 elections, in addition to further scrutiny of the electoral law, and the Ministry of Justice. Justice has now started the public consultation on the proposed changes to the donation regime.

Key measures being considered include lowering the threshold for public disclosure of party donations from $ 15,000 to just $ 1,500 – a move that would bring it closer to the threshold for candidates.

The gap between the thresholds has long been a concern for some, as it in theory allows donors to channel a larger amount of money through a party without disclosure, in the hope that the donation will then be sent to the candidate of their choice.

In June, Newsroom reported a large number of national MPs, including the new party leader, Chris Luxon, whose returns were “almost universally limited to local or central party donations” (the party attributed this fact to his interest in grassroots local election committees who “work hard at the local level … to build strong networks and relationships” and have rejected any suggestion of impropriety).

A Justice Department briefing in Faafoi noted that a tiered disclosure system “has inevitable tradeoffs between anonymity and transparency which can make it difficult to establish reasons why rule violations occur” .

Additionally, while this approach aims to reduce the compliance burden for party secretaries and candidates, our early consultation with party secretaries to inform the proposed package of changes suggests that it may not be. still the case. “

Another area of ​​concern, the lack of transparency regarding “in-kind” donations of works of art and other property, should also be addressed with the introduction of more stringent disclosure requirements.

“There is a clear public interest in understanding the potential financial influences on political parties and candidates. The regulation of political financing – especially donations – is important to maintaining public confidence in the integrity of our electoral system.

As previously reported by Newsroom, Labor’s return of donations for 2020 included over $ 180,000 in donations listed under the name of an artist who donated their work, rather than the person who paid for it (a door Labor spokesperson at the time said the party had received advice “that our art auctions comply with both the letter and the spirit of New Zealand’s donation laws”).

“Public concerns about fundraising activities (eg dinners and auctions) and in-kind donations (which may include goods, services and expertise donated free of charge) suggest that a greater transparency could help reduce any vulnerability in these areas, ”ministry officials said. Faafoi.

Other changes subject to consultation include increasing the frequency of donation reports; the introduction of reporting requirements for non-anonymous donations under $ 1,500 and for loans to candidates; require political parties to publicly disclose their financial statements; and removing the requirement for parties to disclose the identity and monies of a donor within 10 days when they have given more than $ 30,000 in the past 12 months.

The changes “would improve the overall transparency and openness of political finance without unduly restricting the ability of donors to make donations, or the ability of parties and candidates to raise the funds they need,” officials told Faafoi. .

“There is a clear public interest in understanding the potential financial influences on political parties and candidates. The regulation of political financing – especially donations – is important to maintaining public confidence in the integrity of our electoral system.

Andrew Geddis, a law professor at the University of Otago, told Newsroom that the proposals do not fundamentally change the structure of the current donation regime, but rather attempt to fit into the system while addressing its flaws.

Geddis said aligning candidate and party disclosure thresholds, in addition to closing a potential loophole for candidates, would also make it more difficult for anyone to illegally divide donations among a number of people to hide their identities – the mechanism under surveillance in the Labor Party and National Trial of the OFS.

“If you lower the disclosure threshold to $ 1,500, you have to involve a lot of people to try to do that, and of course the more people involved the more likely you are to get caught.”

With in-kind donations, it made sense to reveal who donated the item in question and who paid the money for it, capturing “the full extent of gratitude the party could feel.”

Justice Minister Kris Faafoi called on the authorities to consider how to crack down on donations from “non-individual entities” such as businesses and unions. Photo: Rob Kitchin / Pool

The Justice Department has also asked for public opinion on whether or not to ban anonymous donations, currently permitted up to $ 1,500.

Officials told Faafoi that while a ban could be “a significant change in principle towards transparency,” the counter-arguments included the need to protect the privacy of donors in a manner similar to secrecy at the ballot box, as well as the potential moderating effect on donors. participation “for those who prefer anonymity to this form of political participation”.

The briefing cited anonymous donations as a specific “vulnerability” in the current system, noting that a person could make repeated anonymous donations below the $ 1,500 threshold without being easily detected.

Geddis told Newsroom that a total ban on anonymous donations would end “age-old practices” like raffles and passing the hat at party meetings, while even a de minimis threshold of $ 100 could pose problems .

“Someone who gives the party $ 150 without really wanting the party to know who he is… is that really going to corrupt the system in such a horrible way?” because once you’re on the party radar, they come after you for money over and over and over again. “

Faafoi also called on the Justice Department to review the rules for political donations made by “non-individual entities” such as trusts, corporations and unions.

Legal entities splitting donations

Officials said there were “both precedents and merits for these types of restrictions as they limit the influence of vested interests,” but noted that these rules could be administratively complex and lead to unintended consequences such as as donor splitting or channeling donations.

Any change in the region could also have a disproportionate impact on certain groups, including Maori, if they were more likely to make political donations collectively rather than individually.

Given the complexity of the issue and the potentially large and uneven impact on party finances, the ministry recommended not to make any changes in this area until the 2023 elections.

Geddis said one of the biggest unresolved issues was the ability to split donations between legal entities and other vehicles controlled by an individual. Although there was a provision in the legislation making the sharing of a donation among several subsidiaries a fraudulent practice for a legal person, the SFO had not taken any action concerning donations of a similar structure in the New case. Zealand First Foundation, suggesting he thought the law could not have been broken.

The most important questions regarding donations and political party funding had been referred to the Independent Review Panel, but any change on that front would be at least two election cycles away.

The consultation period will run until January 25 next year, and all changes are expected to be enacted by July so parties and candidates have enough time to adjust.