The Prime Minister has called out a $150,000 donation to the National Party as "outside the spirit of the law".
The donation was made by a racing industry billionaire through his New Zealand company, despite himself not being a New Zealand citizen or resident. The large donation was received by the Electoral Commission on May 15, 2017 and has previously been reported on by media.
In 2016, then-Trade Minister Todd McClay met with the businessman and members from the racing industry in China.
"Officials were there at all times, there was never any question about support for a political party," Mr McClay said.
"A year later, I invited the person in question to visit Rotorua as the tourism capital of New Zealand. He did raise that he would like to support the National Party.
"At that time I asked a colleague to liaise with the New Zealand company around that.
MrMcClay said he didn't meet with the person again between the time of the discussion and the election.
"It is a New Zealand company that made the donation," he said. "It is within the rules."
There is a cap on overseas donations of $1500, but it does not apply if the donation is from a New Zealand company.
But even if it isn't a direct violation of the law, that's now how the legislation was intended, the Prime Minister said today.
"The story that you've seen in the news today is outside the spirit of the law," Ms Ardern told reporters.
"What happened here was legal, but equally it was outside the spirit of what our law intends when it comes to foreign donations.
"We do have legal protections in place to prevent foreign interference in our elections through large monetary donations."
National's Simon Bridges said there was no conflict of interest, the donation was declared and was fully within the law.
The issue of foreign interference in elections is being looked into by a Select Committee. The Government would then decide if any changes should be made.
Mr Bridges said he was open to what the Select Committee would say on political donations.
"Let's remember, there are many companies that New Zealanders would think are actually New Zealand companies, they are New Zealand companies legally, but have foreign ownership interests and directors and the like."
The Green Party called the donation "deeply alarming", saying it highlighted the need for stronger and more transparent donation laws.
MP Golriz Ghahraman said individual donations should be capped at $35,000, overseas donations should be banned and the threshold where donors can be anonymous should be lowered to $1000 "so that we can see who is donating to political parties".
SHARE ME