Case study: Tax incentives for charitable giving reference group

This work and the assistance of the reference group fit the “consultation” niche on the engagement spectrum.  This working relationship is consistent with the generic tax policy process (GTPP), which is the process used for developing tax policy in New Zealand.  The reference group enabled the GTPP to be expanded to encompass wider consultation with the community and voluntary sector.

In 2005-2008, the previous government’s Confidence and Supply Agreement with United Future provided for the development of a new tax rebate regime for charities during the current term of Parliament.

In July 2006, Inland Revenue met with a small group of individuals drawn from the community and voluntary sector.  These people had for some time expressed a keen interest to be involved in this work or discussions about what this proposed measure would mean for the sector.  The group was expanded by approaching others to get a wider representation. They were also able to articulate how, and to what extent, they could add-value to Inland Revenue’s policy process.  In particular, indicating they could be used as a reference group to test policy ideas and to assist in developing a consultation strategy for the forthcoming discussion document.

Inland Revenue also worked closely with the Office for the Community and Voluntary Sector to develop a wider picture of the non-profit sector and tease out the policy response.

A discussion document, Tax incentives for giving to charities and other non-profit organisations was released in October 2006 proposing a range of options.

To support the release of the discussion document, the reference group advised Inland Revenue on an appropriate consultation strategy with the community and voluntary sector.  The purpose of the strategy was to increase awareness of the discussion document proposals and encourage the sector to provide feedback on the discussion document.

The strategy included a series of information workshops in the five main centres (Wellington, Christchurch, Dunedin, Hamilton and Auckland) after the release of the discussion document.  About 300 people attended these workshops.  The workshops were arranged and hosted by local tangata whenua, community and voluntary sector groups, and funded by Inland Revenue.  Inland Revenue presented an overview of the discussion document and answered questions from the floor. This was followed by small focus groups around each of the options, which were facilitated by community representatives. During these workshops, many participants learnt about the existing tax rules, as well as suggesting changes.  The workshops also provided umbrella groups with clear messages for their written submissions.

A record of the feedback from each of these workshops and the 229 written submissions received on the discussion document were summarised in a feedback document, which was sent to the Ministers of Finance and Revenue for their review.  As foreshadowed in the workshops, the feedback document was also made public. This was a good faith gesture to show that feedback recorded in workshops and received in written submissions had been faithfully reported to the government.  It  can be viewed on the website of Inland Revenue’s Policy Advice Division.

Inland Revenue and the reference group continued to work together after the discussion document process.  We met on a monthly basis or when the need arose.  This relationship worked because there was open information sharing and close working relationship from the beginning of the policy development phase.

There was huge support for the initiatives proposed in the discussion document. Feedback from consultation considered that the proposals relating to increasing the tax relief on charitable donations did not go far enough. Government listened to what the feedback said. For example, feedback strongly supported removing the current caps altogether as this would provide a stronger incentive for people to give more and would align the New Zealand tax treatment of donations with other OECD jurisdictions.  The government agreed, and the current limits were removed with effect from 1 April 2008.

The feedback received, helped the government to prioritise which options should go forward; which should be explored further; and which may not work in a New Zealand context. This led to the tax changes outlined above, as well as two further discussion papers containing proposals for:

• clarifying and simplifying the tax law on how reimbursements and honoraria paid to volunteers in the non-profit sector are to be treated
• exploring whether New Zealand should introduce a pre-tax payroll giving scheme.

Proposals in both documents received overwhelming support from a wide range of people and organisations, and were seen as a positive step towards the development of and support for the charitable and voluntary sectors in New Zealand. Both initiatives were included in the Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill, which was introduced into the House in July 2008.

A more tailored approach to consultation was adopted to support the communication on these documents and engagement with affected parties.  Meetings were held with umbrella groups representing the charitable, community and voluntary sector, employers, special interest groups and tangata whenua.  The reference group helped to arrange meetings with the community and voluntary sector and also helped to communicate the proposals in the documents through their networks.

It was important from the outset to show good faith and to engage the sector early in the policy process. 

The reference group concept is widely used in the development of tax policy. Without input from this group and support from community organisations in hosting the workshops, consultation with the wider sector might not have been as effective and the process would have taken much longer – which would have meant the legislative changes would have been later. 

Many of the initial ideas and supporting research material that informed the first discussion document were provided by members of the reference group. The reference group considered that the first discussion document was significantly more comprehensive than it might otherwise have been as a result of officials working with the reference group from the beginning. 

Inland Revenue and the reference group shared a common understanding of the purpose and objectives of this work and there was a genuine commitment to a working relationship based on honesty, respect, openness and trust.  Good humour and fun helped too.

The reference group commended Inland Revenue’s initiative in engaging the sector from the start of the policy development process and for supporting a consultation process that was inclusive and transparent.  The only suggested improvement was that the reference group could have benefited from having tangata whenua representation.

Case study uploaded December 2008.