Reviewing the political donation rules

Victoria University of Wellington's Dr Simon Chapple and Thomas Anderson ask what issues should be on the Government’s reform agenda when reviewing the way our political donation laws work

In response to public controversy surrounding the Jami-Lee Ross scandal, Justice Minister Andrew Little has signalled a review of political donations regulation. Changes may be introduced before the 2020 election.

What issues should be on the Government’s reform agenda?

Currently, donations in general elections are regulated under the Electoral Act 1993 and in local body elections under the Local Electoral Act 2001. Consideration of broader aspects of the political environment, such as how we fund political parties and where we place the minimum voter threshold for Parliamentary representation, are necessary to consider in conjunction with regulation of donations. We do not discuss these important issues here. Instead we focus on several other dimensions important for reform.

Consistency in regulating overseas donations between central and local body politics

The Electoral Act caps overseas donations for both candidates and parties at $1500 per donor per year, but the Local Electoral Act does not regulate them. Especially in the wake of evidence of significant recent overseas interest in local body politics by the People’s Republic of China, there is a potential issue here. Moreover, given overseas donors are neither citizens nor residents and have no vote, there is a strong argument for the prohibition of overseas donations entirely in both local and national elections.

Consistency in the treatment of anonymity

The main argument for allowing donations to be made anonymously is one of donor privacy. If a donor is named, it is usually obvious for whom they are voting. The implied privacy of the ballot box, it is argued, is consequently compromised. By setting limits on the size of anonymous donations as we do in both Acts, we have decided as a society that this privacy argument is not absolute. It must be balanced against the need for public disclosure of the identities of significant donors, to ensure transparency about whether money is unfairly or unethically influencing politics.

However, there seems to be no reasonable justification for the Electoral Act setting different and arbitrary public anonymity thresholds for donations to candidates (which can be made anonymously below $1500) and for party donations (which can be made anonymously below $15,000 – ten times more than for candidates). Why is privacy in terms of party donations more highly valued than for candidate donations? In both cases, one has information on a person’s possible vote, arguably an equal privacy violation. The sensible thing would be to set the same anonymity dollar threshold for both candidates and parties.

In addition, donations can be made by organisations – businesses, NGOs, unions, etc – who cannot vote and hence have no voting privacy to violate. There is no reason in such cases not to publicly disclose even the smallest donations.

Consistency in reporting of aggregate donations below the $1500 threshold

Under the Electoral Act, the number and aggregate value of party donations made by named donors and under $1500 in value are not required to be reported to the public. However, the number and aggregate value of anonymous donations to a party under $1500 are required to be publicly disclosed. There is no privacy or cost reason not to disclose the total number and value of party donations under $1500. The information is already collected by political parties. Such disclosure would allow important information about the number and value of smaller donations to be published, without infringing donor privacy.

For candidates, both the Local Electoral Act and the Electoral Act cap anonymous donations at $1500. In both cases there is no reporting on numbers and values of named or anonymous donations under $1500. Names and addresses of donors over $1500 must be publicly disclosed. Again, it seems appropriate that total values and numbers of named and anonymous donations under $1500 for local and national level candidates should also be publicly disclosed.

Disclosure thresholds should rise

We also believe disclosure thresholds themselves may be far too high. Very few New Zealanders can afford to donate anything near $1500 to a local or national candidate, or $15,000 to a party, so relatively few people’s privacy would be adversely affected by lowering disclosure thresholds. After all, large donors are trying to achieve more political influence than their one democratic vote gives them. They can’t expect the same privacy rights as the broader public. Much lower thresholds have been instituted in similar jurisdictions. For example, in Canada both parties and candidates must disclose the identity of donors giving above CAN$200 (about NZ$220).

Consistency in penalties for breaches of donations law

Currently, penalties for breaching the two Acts’ donation provisions are not well aligned. For filing a false return under the Local Electoral Act, fines may be up to $10,000. Penalties for Electoral Act breaches are much larger. For example, filing a return within the late period without reasonable excuse may involve a fine of up to $40,000. Again, greater consistency is desirable.

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