Hon Peter Dunne's Speech to Fundraising Institute of New Zealand’s Annual Conference Dinner
5 May 2010

8.30pm, Monday, 3 May 2010

Hon Peter Dunne was awarded the awarded the prestigious Henry A Rosso Award in recognition of his support for philanthropy in New Zealand.at the conference dinner. Previous winners include noted philanthropists Stephen Tindall and the late Sir Roy McKenzie

I am very pleased to be here with you in Nelson this evening to celebrate the fundraising efforts of your members at your annual awards dinner.

Promoting philanthropy is a topic dear to my heart, for a number of reasons.

I believe very much in the power of communities to resolve problems, and in turn in empowering those same communities to take charge of the issues that confront them.

It is a short step from there to encouraging the promotion of philanthropy and what we call the culture of giving to enable communities to take control of their own destiny.

The English political philosopher, Jonathan Sacks, has described the creation of the modern Welfare State as leading, albeit inadvertently, to the “socialisation of responsibility”.

In other words, according to Sacks, and I concur with him, the well intentioned efforts of the late 19th and early 20th centuries to create, in countries like Britain and New Zealand, what became the Welfare State to protect families and communities from the inequalities building up in society – in areas like health, education and access to social services – has had the perverse consequence of removing from families, neighbourhoods and community institutions some of the responsibilities they previously carried out in promoting the educational health and welfare needs of the communities they were part of, in favour of the new state bureaucracies that the Welfare State established.

While these things have occurred for the most noble of reasons, Sacks would argue that the overall effects have been detrimental as far as the lives of local communities, neighbourhoods and towns have been concerned, because the responsibility for caring about a community’s concerns has now become someone else’s – the state’s, to be precise.

In turn, that has disempowered communities, removed their sense of commitment to each other, and, as Sacks says, effectively socialised responsibility.

It is now “someone else’s problem”, and, as a consequence, individual and community apathy, leading to deeper alienation, has intensified – the “there’s nothing I can do about it” syndrome, if you like.

The debates we have about, for example, where a public hospital should be located and what services it should provide, are but one manifestation of this phenomenon at work.

Indeed, it may well be that the Maori Party’s promotion of a Whanau Ora approach to social services provision derives from the same basic concern.

Therefore, the re-establishment of philanthropy and the promotion of a culture of giving is an important step towards bringing responsibility back to communities and helping people take charge of their own futures once more.

My party, UnitedFuture, was founded on those old liberal values of the assertion of personal responsibility within the context of being part of the wider community, which underpin Sack’s approach, and which I have sought to give expression to as Minister of Revenue, through my promotion of a range of initiatives to promote charitable giving in this country.

We have used our confidence and supply agreements with both the previous Labour-led and the current National-led governments to give effect to the various charitable giving initiatives we have put forward over the years.

In turn, that has led to a very happy relationship with your institute and the philanthropic sector generally because of your key role in helping community organisations achieve their fundraising goals in the not-for-profit sector.

It is wonderful to see so many of you here tonight.

It goes without saying that your work in the charitable sector has touched many lives, and plays a strong part in the overall development of our society.

Indeed, were it not for your efforts, much of the vital work of New Zealand’s very large not-for-profit and charitable sectors would at best be severely hampered and at worst simply unable to proceed at all, which, given New Zealand’s chronic fiscal pressures, would mean large gaps in our social and community services infrastructure, that the modern Welfare State would not be able to fill.

Bridging those gaps is, to me, a powerful rationale for why we need a strong and vibrant not-for-profit and charitable sector, and why we therefore need policies that encourage that, and incentivise public support for its work.

So, against that general background, I would like to briefly update you this evening on some of the tax developments relevant to the charitable sector that I have promoted over the past four years.

As many of you will know, the Government introduced a voluntary payroll giving scheme earlier this year.

Under the scheme, employees can make donations to their chosen charities directly from their pay.

They receive tax credits of 33 ⅓ cents for each dollar they donate, for that pay period.

So, if they donate $10, they will receive a tax credit of $3.33.

For charities, it can be an efficient, low-cost way to raise funds, and it can help to deliver the regular income support they need.

For employees, it provides a convenient and simple way to donate to charities of their choice.

In particular, it eliminates the need to collect receipts or wait until the end of the year to obtain the tax benefit of donations.

And for employers, it provides an effective way to support their employees’ charitable efforts.

I believe this will make donations more affordable and encourage people to increase the amounts they give.

I encourage more employers to offer this initiative as it provides a simple and easy way for their staff to be able to give to a chosen charity or cause.

I have long advocated the introduction of payroll-giving – so I am delighted to report that 121 different employers have taken up payroll giving since the scheme began in January.

Through these employers, 7000 employees now have access to a payroll giving scheme.

At this stage while I cannot tell you exactly how many of those employees have made a donation and claimed a tax credit, payroll giving tax credits calculated by Inland Revenue since 7 January this year add up to just under $19,000 – that equates to $57,000 worth of donations.

These figures prove that payroll giving provides a simple and effective way for employees and employers to support their communities in a very practical way.

I am pleased to see two of the biggest public sector organisations, Inland Revenue and the Ministry of Social Development, leading the way in implementing payroll giving schemes.

Although I am proud of what has been achieved so far, I am aware, however, from feedback I have received that some employers have had some concerns about taking up payroll giving.

Some of these include verification of donee organisations, entering payroll giving data into payroll systems and being responsible for distributing those funds to donee organisations.

I have asked officials to look into these matters.

One way to address them might be to have a payroll-giving intermediary perform some of these functions.

My officials are due to report to me shortly on what might be needed to enable such intermediaries.

The introduction of payroll giving follows on from earlier legislation that took effect in April 2008 that changed the rules around the amount of money that both companies and individuals could claim as tax deductions or tax credits for cash donations to donee organisations.

Up until that time, the maximum deduction for cash donations for companies was five per cent of net income.

For individuals, the maximum claim was paltry $630.

The changes arose from a discussion paper I issued in 2006 about how the rebate system could be changed to better promote a culture of charitable giving, and I want to again acknowledge all of you who made submissions as part of that process.

It is too soon to say how the threshold changes are going, but on returns received to date for the 2008/09 income year, $184 million in donations tax credits have been claimed – an increase of $70 million in the first year of lifting the threshold for these credits.

That, by any measure, is a big boost in the income of charities.

Companies and individuals will have filed their tax returns for the last financial year but Inland Revenue is still processing those figures.

Further work is also being carried out on a range of other mechanisms for delivering tax relief on charitable donations.

For example, my officials are currently developing the idea of implementing gift aid in New Zealand.

In general, gift aid enables the tax benefit of charitable donations to go to the donee organisation, rather than the donor.

The result is that the donee receives greater cash donations without there being any change in giving levels.

They are also looking at specific tax relief for gifts of cultural significance, similar to such relief offered in countries such as Australia, Canada and the United Kingdom.

While it is too early to say whether and when such schemes might be implemented in New Zealand, I am keen to see the necessary preparatory consultation on this work undertaken now.

I have previously indicated the Government’s interest in extending access to imputation credits to the charitable sector.

While this issue remains on the agenda, it has not been progressed further at this stage for essentially two reasons.

First, the changes to the donations rebate and the introduction of payroll giving have been very significant, and we wanted to ensure that these changes have had good time to “bed down” before embarking on any further changes.

Second, you will be aware that, like New Zealand, Australia has also been carrying out a full review of its tax system – the so-called Henry Review.

One of the key concerns to New Zealand in the trans-Tasman tax relationship has been promoting the mutual recognition of imputation credits.

This has been a bone of contention between the two countries for some years now, and it would have been difficult for us to move unilaterally on the issue of access to imputation credits for the charitable sector, while the broader issue remained uncertain.

The Australian Government released the Henry Report and its response to it just yesterday, and in the light of that, officials here will now be considering the best way to proceed on the imputation issue, including the specific question of charities, and advising the Government in due course.

That brings me to the end of this brief update about our recent changes.

Your conference provides a valuable opportunity for you to discuss these changes and to think about how you might inform the organisations you work with.

I will look forward to hearing of your deliberations and conclusions, and in the meantime, thank you once again for your invitation to be here this evening, and for the ongoing valuable work which you do.