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30 March 2004
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Charities Bill — First Reading

[Volume:616;Page:12108]

Charities Bill

First Reading

Hon MARGARET WILSON (Minister of Commerce) : I move, That the Charities Bill be now read a first time. At the appropriate time I propose to move that the bill be referred to the Social Services Committee for its consideration.

The Government both recognises and highly values the significant contribution the voluntary and charitable sector makes to New Zealand society. Since June 2000, when my colleague the Hon Steve Maharey, the first Minister for the Community and Voluntary Sector, publicly acknowledged the importance of community, voluntary, iwi, and other Māori organisations to the health of our country, the Government has been working to improve its relationship with the sector. Following on from the Hon Steve Maharey’s acknowledgment came the signing of a statement of Government intentions for an improved community-Government relationship in December 2001. The report of the Community-Government Relationship Steering Group was published 8 months later. Last year saw the Office of the Community and Voluntary Sector established. The Government’s commitment to improving its relationship with, and strengthening its support to, the community and voluntary sector is ongoing, and the tabling of the Charities Bill in the House today is further evidence of that commitment.

This bill provides for the establishment of a new Crown entity, the Charities Commission. The commission’s primary function will be to administer a registration and monitoring system for charitable organisations and approved donees. The commission will also be responsible for educating and assisting registered charitable organisations, approved donees, and other people to comply with their regulatory obligations and duties. Also, the commission will consider, report on, and make recommendations on any matters relating to charities, will stimulate and promote research into any matter relating to charities, and will carry out any other functions the Minister may direct it to perform.

Creating a registration system will help to foster a culture of philanthropy and giving in this country, by increasing the public’s trust and confidence in charitable organisations. The bill provides that all organisations wanting to register will need to supply details of their activities and purposes. The commission will then assess those details against the requirements of the charitable purposes test, which are the advancement of education and religion, the relief of poverty, and any other purpose beneficial to the community. All registered charitable organisations will be issued with a unique registration number. That number will need to be displayed on any materials used when money is being collected from the public, so that people who make donations can be assured of the organisation’s charitable purpose and financial solidity.

Registration with the commission may be voluntary, but only those organisations that choose to become registered can continue to access tax exemptions or be classified as approved donees. Registered organisations will have to file an annual return, showing that they are undertaking charitable activities. In addition, they will have to provide the commission with basic financial data when completing their annual returns. That will also help to increase the sector’s transparency and accountability to the donating public, and to those to whom it provides assistance. All information filed with the commission will be publicly available and accessible on the commission’s website. That will increase transparency and promote good governance. The Government hopes that it will, in turn, encourage more people to support charitable organisations. The ongoing monitoring provided for in the bill will mean we can make sure that tax exemptions are being appropriately used by the organisations entitled to them.

The registration and monitoring system will also provide more information about the charitable sector. Currently, there is no general collection of information about the activities or funding sources of charities. For example, one of the main forms of assistance available to the charitable sector is the exemption from paying income tax. However, the exact extent of that assistance is unknown. The information collected by the commission will provide a better indication of the size and scope of that support in the charitable sector. It will place us in a much better position to assess whether assistance to the sector is as well targeted as it could be or whether it should be improved, and if so, how.

The establishment of the Charities Commission will also help to bring New Zealand into line with other Commonwealth countries, where registration and reporting regimes for charities are commonplace. It is also the first step towards instigating measures to satisfy New Zealand’s international obligations under the Financial Action Task Force’s Eight Special Recommendations relating to the financing of terrorist organisations through not-for-profit entities.

As I mentioned earlier, the commission will be a new Crown entity. The board will be made up of five to seven members. The responsible Minister will appoint the board members, in consultation with the Minister of Revenue and the Minister for the Community and Voluntary Sector. We will be actively calling for expressions of interest from people wanting to be commissioners on the inaugural board. That will be carried out by contacting key groups in the sector, as well as by advertising in the media. As a Crown agent, the Charities Commission will be required to give effect to Government policy. However, it will be fully independent when using its statutory powers—for example, when making a decision on whether to register a charity. The Inland Revenue Department will continue to have an audit function, and to have the authority to deny a tax exemption to a registered charity if it is not satisfied that the purposes of the organisation are charitable.

I intend to move that the Social Services Committee consider the Charities Bill.

RICHARD WORTH (National—Epsom) : National is absolutely opposed to the Charities Bill, and would wish that it take not one further step. This is the second major challenge that the Government has launched against charities. The first was substantially abandoned following a discussion document dated 2001. Members may recall what the Government then proposed to do to charities. There were a number of planned steps, and a detailed time frame for the implementation of the legislation. It was planned that the trading operations conducted by charities were to be taxed in the same way as other businesses. The Government’s intention was to tax charities that put their tax-free profits back into the business, rather than distribute those profits for charitable purposes. The effect would have been to tax the retained earnings of charities. That was the first element of the plan. The second element was that charities would have had to pay fringe benefit tax on fringe benefits provided to employees.

Unsurprisingly, there was an uproar from the charities. There are 37,000 charities in New Zealand, and they range from entities like cancer research foundations and the National Heart Foundation, to kindergartens and sporting clubs. The Government backed off, but now it has come again, and I suggest that what it proposes is equally inappropriate, and is, to some extent, sinister. The latest plan is to register charities, and to collect information about their activities and funding sources. I took those words from the first three lines of the explanatory note of the bill. There is no Charities Commission in Australia. Why is it necessary to have a Charities Commission here?

There are three reasons why National opposes this legislation. The first is that it is utterly unnecessary. The Inland Revenue Department is currently responsible for the oversight of charities, and the regime it has established works well. Whether an entity has charitable purposes, and is therefore entitled to the income tax exemptions provided for under the various sections of the income tax legislation, depends on its constitution, the trust deed, or the other rules under which the entity chooses to operate. There is no statutory requirement to apply to the Inland Revenue Department to secure tax-exempt status. However, many entities choose to do so, in order to gain an assurance that they are entitled to an exemption. When entities seek Inland Revenue Department advice as to their charitable status, they provide the department with a copy of their constitution and/or the rules governing the entity. The department reviews those documents to ensure that the aims and objectives of the organisation are charitable, and that no person is able to derive any personal gain from the organisation. The department confirms, in writing, the sections of the revenue Acts that apply to the organisation. The system is working well. If it were not working well, that would be an indictment on the Inland Revenue Department. There is no suggestion that the system is in other than sound working order, so the first argument is that there is no need for a Charities Commission.

The second argument, which has been articulated by a number of people in the media, is that there is a real threat to public debate and advocacy. The Green member of Parliament Sue Bradford has said—I suggest correctly—that there is a danger that community groups performing advocacy will not be eligible for charitable status. I suggest that she asked a very legitimate question about whether this legislation is an attempt to control or kill off groups that carry out lobbying outside their service function. I assume the Government has the numbers to pass this bill. I assume this is another case where United Future, the so-called Opposition party, will lend its support to the Government to provide the necessary numbers. I commend the Greens for the principled stance they have taken in connection with this legislation, and I urge United Future to carefully consider the stance that it plans to take. As Sue Bradford said, any non-profit organisation worth its salt should be involved in advocacy. I would say that advocacy is a natural consequence of charity. It always has been; it always will be.

Why is the Charities Commission to be entrusted with a tasked function that may well see the advocacy role of charities disappear?

Lianne Dalziel: Ha, ha!

RICHARD WORTH: There was a snigger from one of the Government members in response to the comment I have just made, but anyone who has worked in charitable organisations will know it is really important to advocate for the cause. To cut off that possibility, I suggest, will further weaken the philanthropic frameworks that should be a critical part of the New Zealand system.

The third matter I would like to deal with has a constitutional aspect. If one looks at the explanatory note of the bill, one sees a very clear omission. The omission is that, for some reason, there is no regulatory impact statement or business cost compliance statement. Those statements are required by the Step by Step Guide to Cabinet processes. It is a precise and clear obligation that such statements are required to be reproduced in the explanatory note of a bill. Heading 3.36 in the guide makes that crystal-clear. It states: “The RIS/BCCS”—the regulatory impact statement or the business cost compliance statement—“will also be included in the Explanatory Note to Bills that are introduced into the House.”.

I raise the question of why the Cabinet guide has been breached in this particular case. It is true that there are a number of exceptions contained within the guideline document, but no exception is relevant in this case. The exceptions are clear on their face. This particular bill does not create an exception to the requirement, so we should have seen a statement of the net benefit of the proposal, including the total regulatory costs—administrative, compliance, and economic costs—and benefits, including the non-quantifiable benefits of the proposal. I know why we have not seen that material. The reason we have not seen it is that the Government is ashamed to publish it. The compliance costs of setting up this commission will be substantial, but more significantly, the impact for the 37,000 charities in New Zealand will be out of all proportion to the benefits that can possibly be gained.

New Zealand has not actively encouraged a philosophy of private philanthropy, in stark contrast to countries like the United States, where charitable giving is widely accepted and encouraged with a range of incentives.

DAIL JONES (NZ First) : When I was recently in legal practice, I helped to create a number of trusts under the Charitable Trusts Act. As I did so, from time to time I asked myself what sort of control exists for those charitable trusts. Who knows anything about them? So I made some inquiries about what type of regulatory measure exists for charitable trusts, and I discovered that way back in 1979 there had been a Property Law and Equity Reform Committee report on the Charitable Trusts Act of 1957. I got a copy of that report in the early 1990s. Of course, I misplaced it a long time ago, but I got the library to get it for me again because I was still concerned about the way in which those trusts had been operating.

In paragraph 1, the report states: “The committee has been asked to consider the comments made by T A Gresson, J.”—Justice T A Gresson—“in the case of Re Goldwater Deceased [1967] NZLR 754. Subsequently it was suggested that the whole of the Charitable Trusts Act 1957 called for a general examination. In particular, the question was raised of the desirability of establishing more effective means of control of charitable trusts, perhaps by means of a charities commission along the lines established in the United Kingdom.” So way back in 1967 concern was being expressed in New Zealand about the way in which those trusts were operating, and the lack of control on them. Again, in paragraph 13 on page 7, the report states: “The committee was asked to give particular consideration to the questions raised by the Rev. R M O’Grady, the associate-general of the National Council of Churches, in a newspaper article in which he said: ‘The public has no protection against charities in New Zealand. It would not be difficult for a skilled promotional person to raise $10,000 or more for almost any appeal one cares to name. Simply by national advertising and a small mailing to selected persons, any charity can get itself established in a few weeks. Raising really big money for a charity requires time and planning. By far the best method is the house-to-house collection.’ ”

Concern was expressed in this report, published in 1979, with quotes from the Rev. O’Grady of the National Council of Churches, and Justice Gresson, a High Court judge, about the way in which charities were operating in New Zealand way back in 1967. All I can say on behalf of New Zealand First is that I am delighted to see the Charities Bill before the House. It is long overdue. There are far, far too many rip-offs in our society in so far as charities are concerned.

I thought I would do a little bit of research. I put “charities” into a search engine on the Web, as I am wont to do with various things, and I got the UK website. There are 1 million registered charity trustees in the United Kingdom. My friend from the National Party told us vaguely about the situation in Australia. He circumvented any reference to the United Kingdom, but I am sure his research department also checked the United Kingdom situation. There are 1 million registered charity trustees in the UK! There do not seem to be any problems in the UK with that. I have never heard any complaints about it. What is suggested in this report is that there should be a charities commission along the lines of that established in the United Kingdom. I cannot see any particular reason why there would be problems in the UK; it all seems to work well.

Richard Worth: The problems are on the Web. Tell us about them.

DAIL JONES: I am surprised that my colleague from the National Party who is interjecting now did not tell us about the situation in the United Kingdom, and I suspect the reason was that the process is working very well there, and he was unable to come up with any problems associated with it.

The Green Party issued a press statement that stated: “The definitions of a ‘charity’ are almost unchanged from the 1908 tax law.” In fact, the definition of a charity is almost unchanged from that of 1601, in the Statute of Elizabeth. That is the basis of a charity. It is for looking after the poor, their education, and suchlike. Charities have never been designed for the purposes of political parties. Political parties should not expect to get support as a charity. [Interruption] OK, the National Party is upset now that it has been exposed, but political parties should not expect to get support as a registered charity. That is very, very clear. Of course, the National Party needs some financial support. [] As my colleague said, I doubt it very much. It is well and truly established that looking after the poor, the sick, the unwell, and suchlike is the basis for establishing and supporting a charity, and has been from way back in 1601.

We had a case in the House, around 1979-80, relating to CORSO. Remember how CORSO went? It was a classic example of an absolutely wonderful New Zealand icon of a charity that looked after the poor. I remember that, when I lived in Grey Lynn and used to walk down the road towards Hobson St, CORSO had a wonderful building there where it collected clothes and sent them overseas. But it drifted away from its course—what it was set up for and intended to do—and effectively became a political organisation.

Hon Richard Prebble: A bunch of radicals.

DAIL JONES: A bunch of radicals, absolutely. They were deregistered with regard to charitable purposes, and out they went. I suspect, perhaps, that the Greens are saying they do not support that idea. That is very good. My colleagues from the National Party who are here support the Greens. Well, in this bill there is a clause stating that people with convictions punishable by imprisonment for 2 years or more should not work for charities. I think that is very, very important.

Richard Worth: That won’t rule out all the Greens.

DAIL JONES: That is a very unkind comment from Mr Worth—very unkind indeed. But he is supporting the Greens. He is working with the Greens, and cannot quite make up his mind whether he is for them or against them on this particular provision. As far as the Greens saying that people with those criminal convictions should be allowed to work for charities, and suchlike, I do not agree with them on that matter. I am consistent in my difficulty in agreeing with the Greens on many issues. Generally speaking, however, in so far as this provision is concerned, I think it is important and long overdue that people whose role is to make money available to charities have the minimal degree of registration that is required by this legislation, and that there is some degree of confirmation—

Richard Worth: Minimum of $20,000 a year.

DAIL JONES: —$20,000, yes, absolute nonsense—that charities have some degree of supervisory attention from the Government of the day, and that not any Tom, Dick, or Harry can be involved in charities. They should have a number, and suchlike, so that when collectors go by, at least on the face of it they have a number. We know that the unscrupulous will give themselves a name and number, and will still try to collect money illegally, and the like. But on the whole I think this legislation is a very good idea.

So far as the tax side of it is concerned—and I do not think my colleague has been associated much with charities—for every charity I have registered I have tried to have in its rules a provision that has been approved in advance by the Inland Revenue Department, using the wording required by that department, for the way in which the funds can be utilised in a liquidation, and for the way in which the staff of the charity can be paid. Those are the two things the Inland Revenue Department is concerned with.

To repeat for my friend on the right from the National Party, the mischief that could be done was set out by Justice Gresson in 1967. It was set out by the National Council of Churches in the late 1970s. I am sure that anyone associated with charities knows there are unscrupulous people out there who are willing to rip off the New Zealand public. Doing it by way of a charity—or so-called charity—is one of the best ways possible. This was a little hobby horse of mine when I was in practice—to have something done about tidying up the situation. All I can say is that, on behalf of New Zealand First, I am delighted that this type of legislation, which seems to have worked so well in the United Kingdom, is being introduced into the House today.

SUE BRADFORD (Green) : On the surface of it, the Charities Bill is unexceptional legislation put together in response to long-held concerns by people in both the State and private sectors, as well as in the voluntary sector, that the existing law dealing with the registering of charities for taxation purposes is out of date and inadequate. The overall purpose of the bill is to establish a Charities Commission for the first time in this country, which will register organisations for tax exemption purposes and monitor the financial returns and activities of groups. The bill has been a long time in gestation, finally emerging after a 2-year review and consultation process and a drafting period, first with Treasury then with the Ministry of Economic Development. One would have hoped that after all that time and work they would have got it right, but I fear that that is not the case.

First of all, the definition of what constitutes a charity remains almost unchanged, as my colleague Mr Jones said, from that contained in the archaic 1908 tax legislation on which this bill is based—which in turn is based on very, very old law from England. I take one example from clause 4, “Interpretation”. In subclause (2) “charitable purpose” is still principally defined as that which relates to “the relief of poverty, the advancement of education or religion,”—words that will be familiar to all the poor souls who have struggled to explain to the Inland Revenue Department why their trust or incorporated society should receive charitable status, at any point in the last hundred years or so. Surely, in preparing this bill, the Government could have done more to modernise and update the wording in a political, social, economic, and cultural climate that has changed significantly since 1908—especially when there is a lot of academic and political work happening in this area, not only in New Zealand but also all around the world, on which the drafters could have drawn for inspiration.

Secondly, the Green Party is concerned that as the bill is written there is a real danger that if any community group carries out any kind of political advocacy, it will not be eligible for charitable status. That is highlighted in clause 26(1)(b), which states that an organisation can be removed from the register of charitable organisations if it “(i) has any purpose that is not a charitable purpose; or (ii) is not being maintained exclusively for charitable purposes;”. Because the bill as drafted relies so heavily on the existing legislation, and on the history of how “charitable status” has been defined and interpreted by the Inland Revenue Department up to now, which excludes political advocacy, I am therefore very wary that if this legislation was passed as it stands, it would open the way for Government to control and possibly kill off groups that carry out any kind of political advocacy, lobbying, or campaigning as part of their functions. I welcome the understanding of the National Party on that point. However, its members themselves used that sort of thing against political groups, I might say, during the early 1990s.

That danger becomes particularly apparent in an environment like the one we are in right now, with things like the threats to the funding of groups that carry out any kind of health advocacy, the Auditor-General’s report last year into the funding of groups associated with Donna Awatere Huata, the current National and ACT attacks on many community sector initiatives and individuals, and the Government’s response, which includes, for example, the clamping down on Community Employment Group funding announced today. Most non-governmental organisations do have an advocacy role, whether it is making submissions to select committees or local councils on relevant legislation or bylaws, putting out newsletters that critique Government in their particular policy areas, making statements in the local media, or taking part in a host of other activities. I would contend that those and many similar functions are an absolutely valid part of community sector work, and that the clauses that open the way for groups to have their charitable status revoked for carrying out a non-charitable function must be changed and clarified during the select committee process, so that they cannot be used as a method of political control of the voluntary sector.

Some people will say that what I am on about here does not matter, because groups do not have to register for charitable status—it is entirely up to them. They can be free of all the controls this bill will bring, if they simply choose not to apply to become a charitable entity. Although that sounds fair enough, underneath there lies a further threat. I am really concerned that once the Charities Commission is up and running, and all groups involved have their registration numbers—which they must, by the way, display on every written communication they send to anyone, ever—donor organisations will use those registrations as a shortcut to decide who will get funding and who will not. I know that funders in this country are always under pressure to take shortcuts to decide which groups they will support, and who is deserving and who is not, for their particular purposes—especially in a climate where groups are chronically underfunded and there are usually far more applications than even the most well-intentioned of donors can ever meet. My worry is that once this bill is in force donors, whether they are Government, local government, private philanthropists, or community trusts, will almost automatically exclude groups that do not have registration from eligibility for funding. Groups that do not fit the criteria under this bill, or who want to maintain their independence from Government and do not wish to register, could miss out altogether from most sources of funding, and therefore, in quite short order, die.

Thus I believe that the bill has much wider implications than might be immediately apparent. I hope every non-governmental organisation in the country will be considering the issues carefully, and making submissions to the select committee over the next couple of months. I think it is critical that even those groups that might think they will never apply for charitable status give consideration to making submissions, because of the possible implications of this legislation for them—which are substantial and threatening.

For the majority of groups, which will want charitable status under the new regime, there is a further issue to consider. It now appears that key reporting requirements under the charities legislation will actually be introduced by regulation after the bill is passed. That means that neither political parties considering the bill in the select committee and in the House, nor community groups making submissions, will know what level of compliance will be required. I am beginning to wonder whether the Government is actually using this bill as a kind of Trojan horse to bring in a very high level of financial and organisational accountability, with associated extra compliance costs to be dragged out of groups that are mostly substantially underfunded, anyway, and many of which are struggling right now for financial survival. I commend the National members for understanding this matter. It will be a perverse outcome if, with the passage of this bill, Labour introduces a compliance regime that is so expensive that it will further undermine the ability of groups to survive.

That will be exacerbated by the ongoing attitude of most funders that they will not support infrastructure—only frontline services or projects—and that organisations should as a rule of thumb meet a substantial percentage of such costs by external fund-raising, which again takes time away from the real work of the group. Ironically, on top of this, new reporting requirements could well compel groups to reveal more than they do at present about what proportion of the funds they raise themselves from the public are used for administration and infrastructure costs, thereby risking, in some cases, even more difficulty in attracting external public support.

I also question to what extent the compliance measures to be introduced in the bill and by regulation will be geared to playing a controlling role in the actual day-to-day running of organisations. There are already measures in the bill that allow the Charities Commission to examine and inquire into the activities and proposed activities of any group, into any of the people involved, into the management and administration of the group, into the outcomes achieved, and, of course, into its use of income and property. On top of this, clause 87 says that the Minister may direct the commission to perform any additional function consistent with its broad objectives. People less paranoid than me may not be worried by this, but I do urge awareness of the sensitive environment in which groups are currently operating, and recollection of the traditional hostility of Governments towards the political advocacy functions of the voluntary sector.

The way that this bill has been written and devised overall appears to fly in the face of a lot of the good work that has been done over the last 4 years through the Community-Government Relationship Steering Group, the He Waka Kotuia report, and other processes that are still happening around the country. The bill does not reflect a particularly sound understanding of the principles that have been brought out through those processes, or of how the sector works. It appears that the bill arises from Treasury and the Ministry of Economic Development, not from the Ministry of Social Development, which has actually been that part of Government engaged in the cooperative processes initiated soon after the 1999 election. I may be wrong, but I think that perhaps if the Ministry of Social Development had written this bill, it might have been a more creative, responsive, and courageous piece of legislation.

However, it is of course not too late to turn this bill round. The Green Party will be supporting the Charities Bill through at least its first reading, in the hope that during the select committee process we will be able to work with other parties to improve the legislation in a whole range of ways. We are keen to work with community sector organisations to ensure that this bill ends up having a positive, rather than a negative, impact on a sector that has been incredibly politically battered over the last 14 years, and does not need a Labour Government taking further steps to colonise and control what is left.

Hon RICHARD PREBBLE (Leader—ACT) : I rise on behalf of the ACT party to speak on the first reading of the Charities Bill. The principal purpose of the Charities Bill is to set up a new Government organisation called the Charities Commission, which will register all charities and donees. [Interruption] Having given one speech, why does the Green Party member want to give another? The Charities Commission will register 37,000 charities in New Zealand, and it will then require all those charities to present annual returns. It will then educate those charities, then provide advice to the Government.

As has been observed in Parliament, charities are an important part of our community. Charitable law goes back a very long way. The definition of a charity was established some 400 years ago, and when I hear Green members saying that they have a new idea of what a charity is, I am somewhat sceptical. I say to them and to the National Party that charity, as understood by the community, is looking after the sick, looking after the poor, looking after education, and the promotion of religion. That is the core understanding of a charity.

I do not accept that the community should be financing advocacy. I am in favour of advocacy, but when it is said to be charitable, they are asking those who do not agree with those views to subsidise it.

But let me turn to the essential reason that I think the Government is putting this forward. Clearly, there needs to be some public confidence in charities. Public confidence in charities in New Zealand has been shaken. We have had some spectacular cases of people setting up charities and engaging in fraud. We know that. There have been cases mentioned in the newspapers. But that is not a new factor. There have been frauds for 400 years. How has this Parliament dealt with frauds in charities in the past? We have very strong law, and it is very old law, on how to deal with it. The Attorney-General has statutory duties to pursue corrupt charities. They are set out in section 58 of the Charitable Trusts Act.

The Attorney-General has the power to pursue people who have taken money wrongly from charities, and get it back from them. I draw it to the attention of the House that in the 4 years Margaret Wilson has been the Attorney-General she has not pursued one of those cases that members would have read about in the newspapers. Even those cases where people have been prosecuted, where people have taken money and gone on overseas trips, bought cars and other things for their friends, relatives, and girlfriends—[Interruption] The member is referring to that particular member, whose case is before the courts. The Government has not pursued that member, either. I say that the idea that the Government should set up a new bill, because it has not carried out its present law, is wrong.

Let me make this clear to the House. This commission is going to be a huge quango. It will have seven commissioners, and they will all get paid. But if the British experience is anything to go by, they will have an army of bureaucrats. There are 37,000 charities. Who is going to pay? In the first instance it will be the charities themselves. If members pick up the bill, they will see that there is a requirement for the commission to be sustainable. What is meant by that is that all the expenses have to be got by registration fees. At the moment, 37,000 charities do not have to pay a registration fee, but when this bill goes through they will have to pay. This is an extra cost. Who is actually going to pay that? It will come in two ways. It will come from the public, who thought they were donating money to a charity but will find that Margaret Wilson and the Labour Government have taken the money for bureaucrats and for their girls and boys they appoint to this commission. That is who will have to pay. Who will be the real losers? It will be the poor. It will be those who are not educated. It will be the sick. They will not actually receive the money because Margaret Wilson and the Labour Government think the money should be spent on bureaucrats.

I also object to this. Margaret Wilson said to the House that this was a partnership between the Government and the community sector. The Government is the unwanted partner of the community sector. The Government takes all the credit and none of the risk. The Government imposes all the rules and pays none of the costs. It is the unwanted partner. I have not had a single charity write to me and say: “Mr Prebble, I want the Labour Government to be the partner of my charity and to start imposing bureaucratic rules upon me, reporting requirements, that I have not been asked to pay and have not been asked for by those who donated to my charity. And I want to give the Government money for an army of bureaucrats to supervise me.” I have not received one such letter. If Margaret Wilson has received one from any charity, I challenge her to table it.

But it is a more serious problem that underlines this Government’s whole principle of Government. When we have a case of a few rogues, this Government regards that as an excuse to apply penalties to the law abiding, instead of holding those who break the law accountable. If Margaret Wilson had actively, in a high-profile way, pursued those rogues who took money from the public and then spent it on colour TVs, overseas trips, and the like, and if she had extracted the money and bankrupted the trustees, that would have done more for public confidence in charities than any other measure. The reality, we all know, is that of the 37,000 charities in New Zealand almost the entire number of them are doing good work with no assistance from the Government. They have not asked the Government to assist them, and this Government, because it will not enforce old laws that previous Attorney-Generals have had no difficulty in enforcing, has instead decided to impose its socialist views on charities.

I say to the Green Party that it is not so much my concern that the Government will start to take action against advocacy groups. I am not sure whether advocacy groups are entitled to be charities. However, I worry about the Government setting up a quango of this sort, giving it the powers to advise the Government, and then starting to mould the charitable groups to their making. I agree that it is quite extraordinary that every charity will now have to have a registration number—a sort of tattoo that will be placed on every charity and must be on every single publication they put out. We then read that if they do not do that, this commission can fine the charities $2,000. That is an abuse of power.

This bill has not been asked for. It is not needed. All that is required is an Attorney-General who is prepared to carry out her real role instead of thinking that her job is to advocate for the socialist republic of Aotearoa. This is another step on her socialist agenda. The ACT party—which believes in charity, believes in the concepts of charity, and thinks that charities in New Zealand are doing a good job—is opposed to this bill, and we will vote against it at every stage.

GORDON COPELAND (United Future) : I am really delighted tonight to be able to rise to take a call on behalf of United Future on the first reading of this bill. I say that because I have now been involved in this issue for more than 16 years. My involvement began in December 1987, when, on a now rather infamous occasion, Roger Douglas and others lined up in the Beehive and, amongst other things, announced their intention to place a tax on charity. Charity is an old-fashioned word. It means love of one’s fellow human beings. So for whatever reason—a reason that I subsequently was never able to really get to the bottom of—the Hon Roger Douglas suddenly decided that it was a good idea to put a tax on love.

I might say that the response from the charitable sector was one of immediate and absolute fury. Five hundred years of division within the Christian churches, for example, was quickly swept aside, and an inter-church working-party on taxation, representing all the churches in New Zealand, was formed in short order. Two thousand years of division was put aside when the Jewish congregations then joined in. The group extended to all the voluntary welfare organisations in the country, all the major charities, and eventually to all the sporting clubs, as well, until there were so many people involved from so many sectors that when we went to visit Roger Douglas it was impossible to get all the people into his office. That is how I began to get involved in this issue.

The Government had to back down, basically, in the end. It had to, as David Lange famously said at the time, give New Zealanders a bit of a break so we could all go away and have a nice cup of tea. In the process of doing that, the Government decided it would like to kick this matter into touch, and in 1988 it appointed the Spencer Russell working-party, which reported in 1989. It recommended to the Government of the day that a commission for charities be established. That initiative did not proceed following the change of Government in 1990. During the years since 1990 until, I guess, about 2001, I trekked across to Parliament on many occasions, and spoke to all the successive Ministers of Revenue. I was seeking greater assistance for the charitable sector in terms of better tax rebates for individuals and companies, gifting funds to charities, and, in more recent years, accessibility by charities to imputation credits attaching to dividends received from New Zealand companies. However, all those submissions essentially fell on deaf ears. Successive Ministers of Revenue from both the Labour Party and the National Party made agreeable noises but continually verbalised their unease about more generous donation rebates because of anecdotal evidence that “some charities were involved in tax avoidance arrangements.”

However, undaunted, we continued to trek across to the Beehive, following the changes of Minister as they occurred over those years, and in 2000 we made our concerns known to Dr Michael Cullen. Those meetings were refreshing because they resulted in some positive go-forward. Essentially, Dr Cullen expressed a willingness to look at a more generous donations regime, the question of imputation credits, and a number of other issues, provided a means could be found to ensure that those benefits extended only for bona fide charities. In other words, he sought an assurance concerning the protection of the Government’s revenue base.

A Government discussion document on tax and charities followed in short order, and more than 1,700 submissions were received from affected organisations and charities from the length and breadth of this country. That in turn persuaded the Government to set up a working-party to look at the establishment of a registration, annual return, and monitoring system in relation to all New Zealand charities. In early 2002, prior to being elected to Parliament, I was part of that working-party. By now, all in this House are probably aware that the working-party recommended the establishment of a Charities Commission, which would have responsibility for the establishment and maintenance of a registration, reporting, and monitoring regime for New Zealand charities. The Government accepted those recommendations and has been working since, through an establishment group, to set up the commission.

This bill is, therefore, the climax, as it were, of a 16-year attempt by the charitable sector in New Zealand to bring about a fundamental change in its status within New Zealand society. United Future, of course, now supports the first reading of this bill and its referral to a select committee. I encourage all charities to take the opportunity to make submissions during the select committee process, with a view to finalising the law so that the commission can commence its operations as soon as possible. I think the target date is 1 October 2004.

All of this, in my view, represents a major step forward for the charities of New Zealand. The commission is designed to become a one-stop shop, and will adopt a whole-of-Government approach to bring together the interface between the charitable sector and the Government, something that currently involves much contact with the Inland Revenue Department and a number of other Government departments and agencies. I can speak for many, many charities when I say that their contact with the Inland Revenue Department, in trying to get their charitable status established, has been completely unsatisfactory. At the moment, it can take 18 months to 2 years and the most inane exchange of correspondence one can imagine to get that done. All of that will disappear once this commission is established.

Primarily the commission will be there to assist charities in their establishment, their ongoing operations, and, where necessary, their disestablishment. Eventually, however, tax-free status will be reserved for registered charities only. I want to clarify a situation that was mentioned by Sue Bradford, and that is to do with the definition of charities. This bill will in no way alter the current definition of charities. That will continue to be defined by the courts.

  • Debate interrupted.
  • Sitting suspended from 10 p.m. to 9 a.m. (Wednesday)