United Future
Gordon Copeland

Charities Bill - First Reading

 I say that because I have now been involved in this issue for more than 16 years. My involvement began in December 1987 when—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 to that from the charitable sector was one of immediacy 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 of the churches in New Zealand was formed in short order. Two thousand years of division were put aside because the Jewish congregations then joined in. The group extended to all of the voluntary welfare organisations in the country and all of the major charities, and eventually to all of the sporting clubs as well, until there was so many people involved in 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. Basically, in the end the Government had to back down. David Lange famously said at the time: “To give New Zealanders a bit of a break and for us all to go away and have a nice little cup of tea.” In the process of doing that, the Government decided that it would like to kick this matter for touch and appointed the Spencer-Russell working-party in 1988, 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 speaking to all the successive Ministers of Revenue, and 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 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 change of Ministers as they occurred over those years, and in 2000 made our concerns made 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 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 that 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 and its status within New Zealand society. United Future, of course, now supports the introduction of this bill and its submission to a select committee. I encourage all charities to take the opportunity to make submissions during the select committee stage with a view to finalising the law so that the commission can commence its operations as soon as possible. I think the target date, in fact, is 1 October 2004. Now all of this represents, in my view, 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. It can take 18 months to 2 years and the most inane exchange of correspondence one can imagine to get that done at the moment. 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.

Wednesday, 31 March 2004 9:00 AM

GORDON COPELAND (United Future): I believe that these measures will greatly benefit the sector. Firstly, they will enable Government to look to a more generous regime in respect of tax rates for donations and imputation credits. Secondly, they will increase public confidence in the bona fides of individual organisations. For example, charities involved in street collections, and similar, will do so on the basis that their registered number is prominently displayed. That together with tax rates will motivate New Zealanders to be more generous in the support they give to charities. Charities are the most efficient organisations on the face of the planet. Typically, they involve highly motivated people at both board and operational level, many of whom work for sacrificial salaries. They have an ethos that puts the needs of human beings at the centre of all they do. They can deal with sensitive issues such as hunger, poverty, and family breakdown in a compassionate and caring way, which is impossible in the culture of a Government bureaucracy, and they do it far more cheaply. I think that all of us would quickly decide that we would rather deal with the Salvation Army, the Red Cross, or the Society of St Vincent de Paul than with the Ministry of Social Development or the Department of Child, Youth and Family Services. Research indicates that $1 of social service delivered through a charity would cost the Government as much as $2, were it to be delivered, even assuming charities could attain a similar level of quality through a bureaucracy. The establishment of a Charities Commission will herald a new and exciting day for the charitable sector. When the commission has been established United Future will seek a substantial and significant increase in the level of tax rebates for donations given to charities by either individuals or corporations. That would bring New Zealand more into line with comparable generous regimes in the USA, the UK, and elsewhere. I shall give an illustration of that. A couple of years ago an ex-patriate Kiwi living in New York made a donation of $1 million to the Victoria University Education Foundation. He was able to deduct the entire amount of that gift—$1 million—from his US tax liabilities. Had he made that donation from New Zealand he would have only received a rebate for $1,890 of that $1 million. That illustrates the enormous gap in New Zealand when compared with other countries. That step would boost the income of charities by at least $60 million per annum, but would cost the Government just $20 million, and it would encourage an enormous boost to the nation’s social services.