The objectives of disclosure regulations are to promote accountability and to control the potential for corruption. Arguments of principle against disclosure are discussed in other entries, see Ensuring Openness, Transparency and Desirability of Disclosure of Political Donations.
Disclosure regulations vary greatly in what is required to be revealed, by whom, and to whom. This entry therefore starts by listing the different categories of disclosure regulations. In countries where such regulations exist, they usually apply only to some of the types of disclosure listed below.
Categories of disclosure are as follows:
1. Disclosure of expenditures versus disclosures of incomes. For example, in Britain, parliamentary candidates are required to disclose election expenditures but not the level or sources of income.
2. Disclosure of totals and main sub-headings (of income or expenditure) versus disclosure of full details, including details of specific contributions. For example, in Germany, it is only the total and the main sub-headings of income and expenditures that are disclosed to the public and only donations above a relatively high threshold.
3. Disclosure of party finances versus disclosure of candidates' finances. For example, in Britain, it is candidates' finances that must be disclosed; in Germany, it is those of the parties.
4. Disclosure of overall party finances versus disclosure of election/routine finances as separate categories. In Germany the published accounts for many years were of overall income and expenditure without separate information about expenditures devoted specifically to election campaigns. In Sweden, the accounts that have been submitted since 1980 on a voluntary basis to the government concern their total spending and do not single out the amount spent on election campaigns. 51
5. Disclosure of overall national and local versus national party finances.
6. Disclosure as a responsibility of donors versus disclosure as responsibility of party or candidate receiving donations. For instance, in Britain, responsibility for reporting declarable donations by companies and trade unions rests with the donors, not with the recipient political parties.
7. Disclosure to official auditing body but not to members of the public; disclosure by making materials available for inspection at a government office; disclosure in an official document published by a governmental body; publication in a newspaper.
These distinctions are sometimes important. For example, British legislation requires all donations to political parties or for other political purposes of more than £200 a year to be disclosed. However, the form of disclosure is not wholly effective for two reasons. First, as mentioned above, the responsibility to make a disclosure rests with donor companies and not with parties, candidates or other political bodies receiving the gifts. Second, donors are required to declare these gifts in the annual directors' reports lodged with the authority responsible for the regulation of companies. In practice, it is impossible for researchers to gather information on donations from some half million separate directors' reports. Many donations by companies are thus published in such an obscure way that comprehensive lists of corporate donors cannot be drawn up.
Disclosure Regulations and Other Controls of Financing
In each country, the type of disclosure that is required is determined in large part by the other regulations and subsidies that are in place. For instance, in Britain, the election expenses of individual parliamentary candidates are subject to a legal limit. No similar restrictions apply to national party organisations. Consequently, it is logical that the only form of disclosure that is required is of campaign expenditures by candidates. Candidates do not have to declare sources of income since these are not subject to restrictions. Moreover, national party organisations do not have to make reports on their finances.
Where subsidies are given to political parties on an annual basis, reporting is logically of their routine, annual accounts (as in Spain and Germany). By contrast, where campaign costs are controlled or subsidised, it is these costs that have to be accounted for.
Loopholes
There are various techniques for evasion of disclosure regulations:
1. Illegal cash payments - the traditional 'brown envelopes' or suitcases of bank notes, see Illegal Financing
2. Where donations must be disclosed, payments to parties may be disguised as business transactions or as loans, see Profits from Party-Owned Business Activities.
3. Where donations must be disclosed, payments to parties may be disguised as gifts in kind, see In Kind Contributions.
4. Where donations must be disclosed if they are above a threshold sum, they may be divided into a number of smaller payments, each of which is slightly under the declaration threshold. Separate donations may be made by a husband, wife, children, and so forth.
5. Where this is permitted, donations may be conveyed to a candidate or party through an intermediary. It will then be the intermediary person or organisation which is disclosed, not the ultimate donor.
6. Where donations to political parties or candidates must be disclosed, payments may be given instead to front organisations, personal political funds of politicians, partisan think tanks or foundations, which carry out the political functions of the party but which escape the regulatory regime.
7. Parties and donors may exploit the regulations relating to the timing of disclosures to ensure that such disclosures take place as long as possible after the gift has been made and, if possible, after the election campaign that it has been given to assist.
8. Where expenditures must be disclosed only if they for the purposes of an election campaign, party organisations may display considerable ingenuity in reallocating and disguising these items as routine, non-election expenditures.
See also Loopholes.
Comment
Despite their shortcomings, (discussed in another entry, see Disclosure of Source) disclosure regulations are regarded by some leading commentators on political financing as the key reform measure. Despite Herbert Alexander's warnings that 'political finance reform often does not work in the manner intended by its sponsors' and that 'no panaceas or simple solutions exist', he regards disclosure rules as the 'cornerstone of reform':
'If several basic truths must be considered in designing a system of political finance regulation, at least one basic policy should be universal: comprehensive and timely disclosure. The public has the right to know the sources from which candidates draw their money. In recent years, prosecutions of elected officials on corruption charges have relied increasingly on information filed in campaign reports.' 52
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