Government making political party donation change after NZ First Foundation court case

The Government is moving to fix a loophole exposed by the New Zealand First Foundation court case by clarifying what a 'party donation' is under the Electoral Act.

The High Court in July acquitted two men accused of fraudulently depositing money into an NZ First Foundation bank account. Some money was used for NZ First expenses but wasn't recorded as party donations. 

Justice Pheroze Jagose ruled the men not guilty as the donations collected weren't handed to the party so didn't meet the definition of a 'party donation' under the Electoral Act. The Serious Fraud Office, which brought the charges, has sought leave to appeal the decision.

Justice Minister Kiri Allan on Thursday confirmed the Government would close the loophole by clarifying "that a party donation is when a person donates to a political party or any other person with the intention that the donation is for the benefit of the party".

The minister's statement said the High Court had determined "a person receiving a donation must be involved in the 'governance and management oversight of all the Party's affairs' for it to be considered a 'party donation'".

"This paved the way for third parties not involved in the governance and management of a political party to receive donations for the benefit of the party without having to declare it."

A new offence is also being created. Currently, any person who a 'candidate' or 'party donation' is given to must send it to the candidate themselves or the party secretary within 10 working days. But if they fail to do this, there is currently no offence in the Act.

"The maximum fine for which a person is liable under this new offence is $40,000. A complete defence is available for anyone charged if they can demonstrate they had a 'reasonable excuse' for non-compliance. It is in line with other offences in the Act for similar behaviour."

Amendments to the Act will be made through the Electoral Amendment Bill, which is already moving through the House with the intent of having it in effect before the 2023 election. 

The Bill will lower the threshold for publicly disclosing donations as well as require parties to report donations under $1000 not made anonymously and specify the total amount of all donations received.

Allan said the changes should "clear up any ambiguity about what a donation to a political party is intended to be".

"The change backs up the Bill's original purpose of improving the transparency and disclosure of political donations," the minister said.

"Without this change, an opportunity could exist for political parties to structure their financial affairs in a way that allows them to legally avoid having to disclose their political donations."

She has asked Justice Select Committee currently considering the Bill to reopen submissions, allowing the public to make submissions on the further changes announced on Thursday. The committee will report back by December 5.

Green Party electoral reform spokesperson Golriz Ghahraman said the change was a good first step, but more could be done. 

"The law still protects donations from disclosure if they are given to the Electoral Commission first. When this happens, the commission is able to hand over the donations - regardless of the amount - anonymously to political parties," she said.

"My strengthening democracy bill would close this loophole - and if the Government doesn't support it at first reading then we'll look to close the remaining loopholes by tabling an amendment to the Government's bill."

She wants to see the donation disclosure threshold lowered further and a cap put on annual donations.