According to the Herald on Sunday‘s reporting, Samsung has a “programme of ‘gifting’ products to politicians”. Politicians love free stuff, and Samsung undoubtedly loves its products to be seen in the hands of the nation’s leaders, so everyone’s happy.
Thanks to the Parliamentary register of pecuniary interests, we already know that Samsung gifted Galaxy S4 phones to John Key and National’s Technology Minister Amy Adams. (John Key in fact got three phones – presumably Samsung were worried that our PM breaks more phones than the average punter. Either that, or Samsung really doesn’t have much faith in the longevity of its product line.)
However, what we didn’t know until this yesterday morning, because it wasn’t declared in the register, is that Maurice Williamson also got a Galaxy S4.
Just how Mr Williamson obtained his free phone is a matter of dispute. Williamson told the Herald that “Samsung contacted him through a public relations firm to offer him an “extended trial”. However, an internal Samsung email has a different story, showing Williamson inquiring about the company’s programme of “gifting” products to pollies. The Herald reporting doesn’t show much graciousness from Mr Williamson:
The email shows Williamson wanted the phone “urgently” ahead of an overseas trip in May last year. “He is travelling on Sat, and wants his phone in a hurry,” it said.
So, why did Mr Williamson fail to declare his phone the Registrar of Pecuniary and Other Specified Interests? After all, the value of the phone was apparently $899 and any gift over $500 must be declared. Well, according to Mr Williamson, it was in fact a loan, not a gift. “It will go back to Samsung,” he says, “and hence, no gift occurred.”
Not so. The test is not whether the item will be returned. The test is the level of the benefit received. As the Registrar of Pecuniary and Other Specified Interests states in the Herald article:
“If you were lending someone a house for a year or a car for a year and it has a value of more than $500, I would expect that to be included in your return. If you’re in doubt you should declare. That’s the rule of thumb.”
For tax purposes, a mobile phone is depreciated at 67% in its first year of use (from then on in it depends whether you’re using diminishing value or straight line depreciation). 67% of $899 is $602.33, meaning that if Maurice Williamson kept the phone for a year he would have derived $602.33 of benefit from it. The gift is the use of the phone, and the gift would be worth more than $500, meaning it should have been declared.