Worth Richard: Charities Bill — First Reading 
Worth Richard: Charities Bill — First Reading 
[Volume:616;Page:12109] 
RICHARD WORTH (National—Epsom) 
: 
 National is absolutely opposed to the Charities Bill and would wish that it take not one further step. This is the second major challenge that the Government has launched against charities. The first was substantially abandoned following a discussion document dated 2001. Members may recall what the Government then proposed to do to charities. There were a number of planned steps and a detailed time frame for the implementation of the legislation. It was planned that the trading operations conducted by charities were to be taxed in the same way as other businesses. The Government’s intention was to tax charities that put their tax-free profits back into the business rather than distribute those profits for charitable purposes. The effect would have been to tax the retained earnings of charities. That was the first element of the plan. The second element was that charities would have had to pay fringe benefit tax on fringe benefits provided to employees. 
Unsurprisingly there was an uproar from the charities. There are 37000 charities in New Zealand and they range from entities like cancer research foundations and the National Heart Foundation to kindergartens and sporting clubs. The Government backed off but now it has come again and I suggest that what it proposes is equally inappropriate and is to some extent sinister. The latest plan is to register charities and to collect information about their activities and funding sources. I took those words from the first three lines of the explanatory note of the bill. There is no Charities Commission in Australia. Why is it necessary to have a Charities Commission here? 
There are three reasons why National opposes this legislation. The first is that it is utterly unnecessary. The Inland Revenue Department is currently responsible for the oversight of charities and the regime it has established works well. Whether an entity has charitable purposes and is therefore entitled to the income tax exemptions provided for under the various sections of the income tax legislation depends on its constitution the trust deed or the other rules under which the entity chooses to operate. There is no statutory requirement to apply to the Inland Revenue Department to secure tax-exempt status. However many entities choose to do so in order to gain an assurance that they are entitled to an exemption. When entities seek Inland Revenue Department advice as to their charitable status they provide the department with a copy of their constitution and/or the rules governing the entity. The department reviews those documents to ensure that the aims and objectives of the organisation are charitable and that no person is able to derive any personal gain from the organisation. The department confirms in writing the sections of the revenue Acts that apply to the organisation. The system is working well. If it were not working well that would be an indictment on the Inland Revenue Department. There is no suggestion that the system is in other than sound working order so the first argument is that there is no need for a Charities Commission. 
The second argument which has been articulated by a number of people in the media is that there is a real threat to public debate and advocacy. The Green member of Parliament Sue Bradford has said—I suggest correctly—that there is a danger that community groups performing advocacy will not be eligible for charitable status. I suggest that she asked a very legitimate question about whether this legislation is an attempt to control or kill off groups that carry out lobbying outside their service function. I assume the Government has the numbers to pass this bill. I assume this is another case where United Future the so-called Opposition party will lend its support to the Government to provide the necessary numbers. I commend the Greens for the principled stance they have taken in connection with this legislation and I urge United Future to carefully consider the stance that it plans to take. As Sue Bradford said any non-profit organisation worth its salt should be involved in advocacy. I would say that advocacy is a natural consequence of charity. It always has been; it always will be. 
 Why is the Charities Commission to be entrusted with a tasked function that may well see the advocacy role of charities disappear? 
Lianne Dalziel 
: Ha ha! 
RICHARD WORTH 
: There was a snigger from one of the Government members in response to the comment I have just made but anyone who has worked in charitable organisations will know it is really important to advocate for the cause. To cut off that possibility I suggest will further weaken the philanthropic frameworks that should be a critical part of the New Zealand system. 
The third matter I would like to deal with has a constitutional aspect. If one looks at the explanatory note of the bill one sees a very clear omission. The omission is that for some reason there is no regulatory impact statement or business cost compliance statement. Those statements are required by the  
Step by Step Guide 
 to Cabinet processes. It is a precise and clear obligation that such statements are required to be reproduced in the explanatory note of a bill. Heading 3.36 in the guide makes that crystal-clear. It states: “The RIS/BCCS”—the regulatory impact statement or the business cost compliance statement—“will also be included in the Explanatory Note to Bills that are introduced into the House.”. 
I raise the question of why the Cabinet guide has been breached in this particular case. It is true that there are a number of exceptions contained within the guideline document but no exception is relevant in this case. The exceptions are clear on their face. This particular bill does not create an exception to the requirement so we should have seen a statement of the net benefit of the proposal including the total regulatory costs—administrative compliance and economic costs—and benefits including the non-quantifiable benefits of the proposal. I know why we have not seen that material. The reason we have not seen it is that the Government is ashamed to publish it. The compliance costs of setting up this commission will be substantial but more significantly the impact for the 37000 charities in New Zealand will be out of all proportion to the benefits that can possibly be gained. 
New Zealand has not actively encouraged a philosophy of private philanthropy in stark contrast to countries like the United States where charitable giving is widely accepted and encouraged with a range of incentives.