THE PRESS MONDAY, SEPTEMBER 24, 1979. Tax-free political donations?

Press, 24 September 1979, Page 16

THE PRESS MONDAY, SEPTEMBER 24, 1979. Tax-free political donations?

Most taxpayers should have little quarrel with the Government’s decision to drop its annual contribution to Corso’s administrative costs. These costs have been rising sharply in relation to Corso’s contributions to those in need abroad, the purpose for which the organisation was originally set up to co-ordinate assistance from New Zealand.

The Government’s action should encourage Corso to take a hard look at its administration and the way its income is spent, to ensure that the greatest possible amount is spent on overseas aid. The way is still open for Corso to apply for grants of up to $35,000 a year—almost as much as the grant which has been withdrawn—for particular overseas projects.

In other words, to the extent that Corso continues with its original function of helping those in need, it might lose very little. Its constituent members may also seek grants from the voluntary agencies support scheme, w'hich is part of the $5O million and more directed at foreign aid by the Government. As a part of the country’s aid programme the Corso element is small and administratively costly. Nevertheless, it was once a signal of public support for aid to less fortunate countries and may become so again.

What is the community to make of the decision that donations to Corso will no longer be exempt from income tax? This could diminish the organisation’s income much more, for the majority of its funds come from an annual appeal to individual New Zealanders. Making donations will look a good deal less attractive to some donors if there is no benefit in a reduction in income tax. Most contributors to the annual appeal probably neither qualify nor apply for the tax exemption. For many years Corso has appeared on a list of special funds, for which cash donations have been exempted from taxation. Since Corso embarked on a programme several years ago to “educate” New Zealanders about what it claims are the causes of poverty at home and abroad, an increasing proportion of its income has been spent in New Zealand.

Some organisations which were once members of Corso, and many individual New Zealanders, have objected to this policy and have withdrawn their support. Corso officers, however, have argued that an understanding of the underlying causes of poverty is a first step to improving conditions for those in need. Others have seen in Corso’s “education” programme an attempt to play politics, even an urge to talk and

agitate, rather than get on with the less spectacular business of actually helping those in need now.

Under the law as it stands, contributions to political organisations are not exempt from taxation. The courts have also held (in the instance of a donation to the Society for the Protection of the Unborn Child) that funds are not distributed for charitable purposes if one of the dominant purposes of the society which receives the funds is political. The courts also held, in the same case, that a claim that a donation was for the advancement of education cannot be sustained where the “education” includes “indoctrination with the merits of a cause.” On that basis, Corso’s programme of “education” probably falls outside the scope of donations that are acceptable by the Commissioner of Inland Revenue as gifts for charitable or educational purposes.

Has the Government approached the matter of Corso contributions from the wrong direction? Instead of penalising Corso, might this not be the time to review the whole question of whether donations for political purposes should be free of tax? After all, one major anomaly already exists. Union dues paid by members of trade unions can be deducted from taxable income. For a good many union members, a proportion of those dues eventually find their way to the Labour Party through the union organisation. In fairness it might be argued that contributions by individuals to the Labour Party should also be deductible from tax assessments, and that contributions by individuals and organisations made to other political parties should also be free of tax. Admittedly, a few new parties might be invented for tax purposes.

If all contributions to political parties, at least up to a reasonable limit, were tax deductible, there could be little objection to extending the principle to contributions made to other organisations with significant political activities, such as Corso. Over the whole spectrum of such organisations the loss in tax would have to be made up by increased taxation from other sources. Would supporters of Corso, and contributors to other political and quasi-political organisations, accept such a change? The simpler solution might be an answer, in cash, to Corso’s appeal for funds; and the answer will come from those who support Corso’s administration costs and ideals. Taxpayers who object to direct grants or to making good exemptions cannot complain about such an answer.