Budget makes it harder for charities to raise funds
Saturday, 30 May 2026
Josie Pagani is a commentator on current affairs and a regular opinion contributor. She works in geopolitics, aid and development, and governance.
OPINION: I did not expect the Government to decide that too many people are giving too much money to charities.
It is removing the tax exemption for major acts of philanthropy, limiting deductions to $100,000.
This is a tough time for charities. Old business models are no longer delivering in the way they did. In the aid charity I work for, ChildFund, the appetite for sponsoring a child is evolving into a preference for changing whole communities. That’s good, but more expensive.
Regular small donations from generous Kiwis, the bedrock of all charities, are drying up. The cost of living is increasing demand at the same time it is reducing families’ ability to help out.
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Globally, governments have cut about $50 billion from aid in just two years, about a quarter of the global budget for helping and the largest annual decline ever. This is a catastrophe on the scale of global conflicts. Some 11 million more people will die by 2030, all preventable deaths, from causes like cuts to immunisation programmes. Many of the dead will be children.
We have been lucky in New Zealand that Winston Peters has negotiated to keep the aid budget intact.
But charities are growing more dependent on big contributions from major donors, philanthropists, and family foundations. These are the donations targeted in the budget.
One of the most successful aid charities focuses on bringing clean water to people who have none through a unique business model. Charity Water gets big investors to fund its salaries, equipment, systems, and offices, which provides stability, and means that when you and I can donate, 100% of every dollar we donate goes to where it’s needed.
The Government has just reduced our chance to replicate a model like that.
In Australia the government sets up the tax system to incentivise big donations, not make them harder. It allows you to forgo a lifetime of capital gains tax, if you promise to donate your house to a charity when you die.
The Budget did not disclose the amount the Government will save by capping the tax free component of large donations at $100,000, but it must be significant. If the sums are meaningful for Government, imagine how much more meaningful they are for small, struggling charities.
We face more pressure to exist on a shoe-string, than to make a difference.
There is a myth around that charities should do their work on the cheap, which leads to an obsession with low overheads, low salaries, and cheap equipment, as if every charity worker’s epitaph should read “I kept overheads low”, instead of “I made a difference in the world”.
Why shoudn’t charities doing critical, life-saving work use the best equipment available, employ the most talented staff, and use the best tools to do their work?
This idea of lowering overheads rather than increasing impact can be seen in the Budget’s cuts to the public sector, but with important differences.
Cutting 8000-plus staff won’t change the culture of the public sector. It is overly bureaucratic, risk averse, subject to groupthink, and unable to develop meaningful new policy. It is built around a consultation model that hands a veto to the class of people who are consulted and damages or destroys development for those who are not.
The case for change is to solve those problems to make the public service more effective.
Instead, the public sector’s advocates made the wrong defences. The public sector is not an economic development scheme for Wellington. We do not fund ministries to keep the Wellington flat white market buoyant. Nor is the public sector a social welfare scheme for the citizens of Karori.
Like charities, the public sector exists to get outcomes that improve the lives of people.
Just as charities risk becoming video stores in the Netflix age if they don’t change their business models to attract money from new sources, the public sector has to make the case for better service not more public servants.
Tax concessions for charities date back at least to the Statute of Elizabeth in 1601. The Tudor State wanted to encourage charities, to reduce the cost to the state of relieving poverty.
Today, tax on donations are rebated for the same reason. The Government would have to spend the money for public purposes anyway.
The quid pro quo is that charities are stringently accountable for public benefit. They must spend only in pursuit of public purposes and be publicly accountable for their spending.
Charities will be forced to leave money on the table if philanthropists are taxed on donations over $100,000.
When the focus is on outcomes, not overheads, and not reducing the amount that charities can raise, we make a huge difference in tackling poverty, disease, climate change, and other pressing challenges.
Cutting tax rebates for donations to charities should not be the Government’s highest fiscal priority.