The Big Picture: Changes in rules for political funding

One of the less discussed developments in Finance Bill 2017 is the way Narendra Modi Government has effectively made corporate funding of political parties more opaque contrary to its promise of bringing in more transparency. The Finance bill has made two important changes in this regard:

  1. It has crapped a ceiling that earlier restricted the corporate entities from donating more than 7.5% of its average net profit in the three immediate proceeding fiscal years to a political party.
  2. It has proposed to cancel an existing rule that requires corporate entities to disclose in the profit and loss account the name of the political party to which the funding is made. The company only needs to make a mention of the amount contributed under this category

Analysis:

In the budget, what was proposed was electoral bonds which brought in the concept of anonymity as the person or the company’s identity would not be disclosed to anybody. This has now been extended to corporate houses as well. One can still inspect the financial statements of the company, but will only be able to see the amount of money donated to a political party and not the party to which the money has gone to. This information might not be shared with company’s own shareholders as it no longer needs to be disclosed in the annual financial statement.

Probably in the name of secrecy, they are afraid of the fact that their quid pro quo will be known which they want to protect. This will help the political parties and companies that are with each other. Companies can now source unlimited amount of money from their profits to political parties without disclosing the name of the parties to whom this money is being sent to.

Earlier, every donation of more than 20,000 rupees was declared to the Election Commission. Now it can be transferred easily. This provision shows that the government’s intent is not to eradicate corruption in political funding. According to existing laws, donors can make an infinite number of payments without disclosing their identity by segmenting their donation up into multiple, smaller contributions.

The threshold limit for cash donations for Rs.2000 is not significant either. For example: If a person wants to donate Rs.70,000 to a party, the party concerned can record the details of donations from 35 different contributors of Rs.2000 each.

 

Possible Solutions:

  1. Political parties should be compelled to file their income tax returns on an annual basis along with a third party audit.
  2. Every single rupee donated to political parties should be made transparent. By linking this payment with a PAN or Aadhar Number may ensure transparency to some extent.
  3. All donations should be compulsorily received through non-cash means.
  4. Setting up of a National Electoral Fund where corporates can fund directly without secrecy or anonymity from where political parties will be funded based on performance.
  5. Trolling on social media, hate speeches and paid news are also to be dealt with and controlled because these are also the areas where funds are inappropriately used.

Conclusion:

These measures if taken into consideration seriously along with the will to control illicit funding in elections, some changes can be expected in future.

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