The source of funds for political parties varies around the world based on culture, precedent and legal standards. In most countries in continental Europe, political parties are at least partially funded from the national budget in the form of various types of allowances, including those for regular party operation, functioning of parliamentary groups of party representatives, and for campaign expenses in an election year1. In the United Kingdom and the United States, private financing of parties represents the largest portion of campaign expenses. In emerging democracies, there are examples of the different legal models as well as of compliance in actual practice. A mixed model with public and private financing is frequently established with an obligation for disclosure by political parties and controlling authority held by the EMB. More often than not, a legal vacuum exists regarding sanctions for non-compliance or other enforcement mechanisms at the disposal of the implementing authorities.
In Australia, political parties and independent candidates receive public funding for campaigning, as per the Commonwealth Electoral Act 1918 (the Act). Under the Act, candidates or Senate groups are eligible for election funding if they receive a minimum of 4 percent of the formal first preference vote in the division (House of Representatives) or the state or territory (Senate) in which they stand for election. The amount payable is calculated by multiplying the number of eligible votes by the current election-funding rate, which is indexed to increases in the consumer price index every six months and was set at $1.972 per vote for the 2004 election. The total amount payable that election was $42 million. Following an election, key participants in the electoral process are required to lodge with the Australian Electoral Commission (AEC) various returns disclosing certain campaign transactions. These transactions include donations received and electoral expenditures by candidates and Senate groups; details of electoral expenditures, donations received; donations made to candidates and others by third parties; electoral advertising by broadcasters; and published electoral advertisements.
Regarding political party financing, the disclosure provisions of the Act are intended to improve the integrity of the electoral process by allowing the electorate to be well informed about the major donors to political parties, groups and candidates as well as the levels of some kinds of expenditures by those involved in the electoral process. The AEC receives and processes the various returns required under the Act, makes them publicly available for inspection (on the AEC Web site), and conducts a program of compliance reviews of disclosures made by the political parties and associated entities. Even as the AEC’s workload in administering these requirements and activities continues to grow, it is frequently criticized by parties and members of Parliament who are often interested in exposing the financial arrangements of their political opponents while seeking at the same time to limit the transparency of their own arrangements.
During the 2003–2004 period, some 184 annual returns were processed; 1,190 donor returns were processed; and 102 compliance reviews were conducted. According to the AEC Portfolio Budget Statements, the cost associated with funding and disclosure activities during 2004-2005 was estimated to be $2.8 million.
In Spain, a mixed model applies, with public funding provided to political parties for ongoing and electoral operations. Public funding for campaigning is not directly a part of the electoral budget, and parties can also receive funds from private sources. Campaign subsidies are calculated in proportion to the number of votes and seats obtained. Political parties also receive funds from their membership, private donors, their own investment revenues, and bank loans. Access to state radio and television is free of charge and is managed by a special commission supervised by the electoral committees.
Sweden has a rather peculiar mixed model that is based largely on informal agreements among political parties. For one thing, any political party, candidate or organization can conduct an election campaign. Organizations other than political parties were involved in campaigning prior to the referendum in 2003 on replacing the Swedish currency, the kroner, with the euro. Any business was able to fund campaign organizations prior to this vote, and many did so3. Regarding the financing of political parties, there is no system of regulation, although there is one law containing rules and moral guidelines for political parties. There are no provisions for disclosure of contributions to political parties; however, the political parties represented in parliament reached a mutual agreement in the 1960s to share information about sources of contributions with each other, but not with the general public. Political parties are also obligated to produce an annual report, which is also not made public.
There are four main sources of funding for Swedish political parties: direct public funding, indirect public funding, income from party membership, and lotteries conducted by parties or their affiliated organizations. The main source is direct public funding given to political parties during election periods and between elections, with the amount based on performance in the previous election and current representation in the legislature. Indirect party funding is typically provided through the party-affiliated press, which is publicly subsidized. Although membership in political parties has declined, income from membership still remains important, representing between 5-10 percent of the total budget of the two main parties in the early 1990s. Some political parties or their affiliated organizations receive income from lotteries; the Social Democrats are particularly successful in this respect. Although no law prohibits political parties from receiving funds from private businesses, party leaders agreed in the 1970s to refuse such contributions.
In Guatemala, public financing of political parties is established by the law. Parties are entitled to free postal and telecomunnications services from the calling of an election until one month after its conclusion. Moreover, political parties receive public funding in proportion to the number of votes obtained in the first round of the presidential election, at a rate of 2 quetzals per vote, if and only if a party receives at least 4 percent of total valid votes. Disbursement is made under the control of the national electoral commission, Tribunal Supremo Electoral (TSE), in four annual installments between elections. Political parties may use public funds for either ordinary operations or campaign expenses. The TSE has the responsibility for audit and control of party finances and expenses. Before each annual disbursement, parties must submit a detailed report of expenses. In the event that a political party does not abide by its accounting and reporting obligations, the TSE may bring the party before the courts in an effort to force compliance. Private financing is neither contemplated nor prohibited, and no limit on campaign expenses is established in the law. It follows that it would be extremely difficult to estimate campaign expenses except for the public subsidies component, even if all parties complied with the obligation for disclosure after elections.
In Cambodia, the Law on Political Parties states that parties should be funded through their members’ contributions, from income generated by lawful business activities, from donations of private enterprises or individuals, and from the political party’s own assets. Contributions from foreign firms, public or government institutions, and NGOs are forbidden. Regardless of their participation in the electoral process, all political parties are required to report annually to the Ministry of Interior their income and expenditures, balance sheets, statements of bank accounts, and assets. These documents are not available to the public. Regarding campaigns, the same law establishes that the State shall provide funding for campaigning to political parties on an equal basis; to date, however, this provision has never been applied. Existing laws also require parties to report campaign expenditures and maintain a special account registry showing their sources of income and expenditures. The registry must remain available to the election commission for examination, if requested. The only actual government contribution to campaigns of political parties comes under the provision of free airtime on state radio and TV. The electoral authorities arrange free equal access to airtime for political party campaign messages during the 30-day campaign period. This, however, does not apply to local commune elections.
In Haiti, few provisions or policies had been determined regarding political party campaign activities by the time the electoral budget was drafted and international assistance was pledged for the 2005 elections. This oversight illustrates the uncertainties and challenges that are typical of post-conflict environments.
In Afghanistan, the picture is also rather bleak even though laws regarding political party contributions have been passed. The political entities registered to take part in an election must have a dedicated bank account where all campaign contributions are deposited, as stipulated in the Joint Electoral Management Body (JEMB) Regulation on Political Campaign Finances. Each Afghan citizen or organization may contribute up to 2 million Afghani ($47,000) to a candidate per campaign period. Any contribution greater than 1,000 Afghani must be recorded and reported to the JEMB. The only kind of campaign contribution from a public source that can be accepted is in the form of security services. Thus, current circumstances hold that no public money is available to political parties, its candidates, or independent candidates running for office. Even though political entities are not allowed to accept funding from abroad, international NGOs have been offering courses and advice on how to organize a political party, develop a political program, and how best to run an election campaign in a democratic environment.
Notes:
1Private funding in most of these countries is allowed, but it tends to be secondary in importance.
2All references to Australian electoral costs are in Australian dollars.
3The vast majority of businesses supported replacing the kroner with the euro, thus greatly tilting the balance of funding in favor of the “yes” vote. Some analysts attribute voters’ rejection of the euro at least in part to a backlash against the huge amount of money spent by euro supporters.
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