Rules governing donations need to be reviewed to preserve trust in politics, Sean Whittaker writes.
Despite New Zealand enjoying a reputation as a country with an exceptionally low level of public sector corruption, our position in Transparency International’s Corruption Perception Index — an internationally recognised indicator of corruption within countries — is dropping.
There are several reasons for this downward trend in both our Corruption Perception Index score and our ranking compared with other countries.
One key reason for this downward trend, which is increasingly gaining prominence, is the gaps in how New Zealand regulates political donations.
Political donations are of concern due to the influence they can grant wealthy donors over the formulation of government policy.
Because of the decreasing number of individuals paying party membership fees, all political parties increasingly require money from wealthy donors to fund their political activities and electoral campaigns.
To maintain these sources of funding, political parties are incentivised to align their policies with the interests and concerns of their donors — these interests are often raised at political social events accessible only to such donors.
Thus, the ability of wealthy donors to exert influence over government policy, or even the perception that such undue influence is being exerted, can undermine public trust in government.
The Electoral Act 1993 allows New Zealand’s political candidates and parties to receive political donations provided they report the details of these donations and the identity of the donors to the Electoral Commission.
Among several rules for annual returns, parties must report when a donor has donated over $6000, when an overseas donor has donated over $50, and when the party has received an anonymous donation over $50 or $1500, depending on whether they believe the donor is an overseas donor or not.
These rules apply regardless of whether the donor meets these reporting thresholds through a singular donation or across multiple donations.
Upon receiving these reports, the Electoral Commission publicly publishes the information outlining who has donated to which political party.
This reporting process — and its limited exceptions — are underpinned by the presumption that making the identity of political donors known to the public will prevent undue influence being exerted over government policy.
However, historically donors and political parties have worked in concert to sidestep the regulation of political donations.
For example, donors and political parties have artificially split donations across multiple individuals so that each individual donation falls under the threshold for public disclosure.
Equally, political parties have, in the past, set up trusts in an attempt to hide the identity of donors or to structure their finances so that money given to them does not come under the definition of a political donation.
Such efforts to circumvent the Act highlight a general resistance against the benefits of transparency in relation to political donations, which may give rise to attempts to obfuscate the identity of political donors that in turn increases the risk of political corruption occurring in New Zealand.
To an extent, the law is flexible enough to evolve alongside the attempts by donors and political parties to sidestep the donation rules.
For example, in response to the New Zealand First Foundation case first exposed in 2019, the definition of ‘party donation’ was changed to capture donations that are not given directly to a political party but are instead administered by a trust to the benefit of that party.
Despite this flexibility, there are still critical gaps in the Act which allow for corruption to potentially be manifest in New Zealand’s political climate.
One such crucial gap, described by the Court of Appeal as a ‘‘significant weakness’’, is that it is not an offence for donors to circumvent (or seek to circumvent) the Act’s provision.
Instead, it is only the actions of party secretaries and others that enable this activity that constitutes an offence.
The absence of such a provision means that efforts to prosecute such donors must rely on the less-specific criminal offence of ‘‘obtaining [a benefit] by deception‘‘ — an approach which has proven to be unsuccessful in holding unscrupulous donors to account.
Another equally important gap is the role that third-party promoters are increasingly playing in New Zealand’s political ecosystem.
Third-party promoters disseminate advertising about a candidate, political party or specific election issues, and perform a valuable function in conveying political messages to the wider public.
However, unlike political candidates and parties, third-party promoters do not have to record or report any donations made to their campaign.
Donors can thus use third-party promoters to aid a political party without having to make their support public knowledge, undermining the transparency aims of the Act.
As it currently stands, the law governing political donations in New Zealand is not fit for purpose.
The failure of our legislation to sanction donors seeking to circumvent its laws and to effectively regulate third-party promoters creates opportunities for political donations to be used as a means of corrupting New Zealand’s political parties to favour the interests of wealthy donors.
In order to maintain our reputation as a country with low levels of corruption, and regain our position in the Corruption Perception Index, it is imperative that we address the issue of political donations sooner rather than later.
If we do not, then it is likely that New Zealand’s reputation and ranking in the index will continue to fall and — more problematically — that New Zealand will continue to be exposed to the risk of political corruption embedding itself within our society. — Newsroom
• Dr Sean Whittaker is a senior law lecturer, University of Otago, specialising in public law and governance.
