A first-term National MP has criticised a tax change the government has introduced, saying a plan to cap the donation tax credit has “zero” logic.

Maungakiekie MP Greg Fleming said work was underway to “fix” the cap, but the minister responsible said that was not the case.

Fleming was speaking at a charity sector political hui in Wellington on Thursday, when he was asked about the logic behind the $100,000 donation cap limit.

“Zero,” he responded. “I’ve no problems with being quoted publicly on saying I think it was an error.”

At the Budget, the government made changes to the charity tax credit rules, which would mean no more tax credits once donors give more than $100,000 to charities.

Individuals could claim a third of their charitable donations back as a tax credit, as long as the value of their donations did not exceed a third of their annual total taxable income.

The $100,000 cap will affect about 350 donors when it is introduced next April, but they represent about 10% of donations claimed or about $103 million.

In a regulatory impact statement, the Inland Revenue Department (IRD) said the government spent about $350 million a year on tax credits.

IRD took the view that there was no conclusive evidence the credits actually lead to more giving, and that there was a risk of bad actors and misuse, such as those claiming the credit in advance of the funds being applied to charitable purposes or deriving a private benefit from the donations.

When the cap was announced in May, Revenue Minister Simon Watts said it would ensure the donation tax-credit scheme remained financially sustainable and would also limit tax-planning risks that arose when a donor made a gift to a charity they controlled themselves.

The charities sector has expressed concern that the cap may make would-be donors consider dialling back their donations at a time the sector was already struggling — a view Fleming appeared to agree with.

Fleming said he understood why the cap had been brought in, but there were a “myriad” ways to fix the misuse of donor-advised funds, without introducing a cap.

He said the cap was a “sledgehammer to crack a walnut” and further changes would be made.

“I’m advocating really, really hard for this and I can assure you that work is underway to to fix that,” he said.

Watts said Fleming’s comments were not correct and the government’s position had not changed since the Budget.

“These changes resulted from IRD concerns that, in some cases, the tax credit was being misused for tax planning purposes,” he said. “The change does not come into effect until April 1 2027 and only affects donations over $100,000.

“I am aware of concerns from some about the effect this change could have on charitable giving. We strongly support charitable giving and IRD is continuing to engage with the sector on this.”