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Political Financing

Political Financing

Presentation to Commissioners
Presentation to Commissioners
August 25-27, 2004
August 25-27, 2004
Objectives of regulating
political financing
• Probity and transparency in order to
preserve voter confidence that system is
free from corruption and quid pro quo
arrangements
• Equity to ensure a balanced playing field
among parties and candidates, with none
vastly outspending the others
• Accessibility to electoral competition for all
citizens regardless of their financial status.
Source: Khayyam Paltiel, as cited in Cross, William. Political Parties, (2004:
UBC Press) p. 143
Regulation may extend to…
Activities of:
• Political parties
• Candidates & contestants
• Third parties (interest groups)

In the financing of:


• Election campaigns
• Leadership contests
• Nomination contests
• Referendum campaigns
3 Methods of regulating political
financing

1. Limits on contributions

2. Limits on spending

3. Public disclosure of contributions and


spending
1. Limits on Contributions
• Can place restrictions on source of
contributions (who can contribute).
Examples:
! Prohibit contributions from foreign sources
! Ban corporate and union donations

• Can place limits on amount a source can


contribute through a donation cap or
ceiling.
2. Limits on Spending
Can place limits on spending by:
• Political parties, candidates and third
parties (interest groups) to contest
election campaigns;
• Contestants for leadership and
nomination contests;
• Political parties and third parties on
advertising, broadcasting during a
referendum campaign.
3. Public Disclosure
• Can require reporting of and make
available to public names & addresses of
contributors and amount donated (for all
contributions or for those over a certain
amount)
• Can require itemized reporting of non-
election and election period spending.
Our Mandate and Political Financing

• Not formally part of our mandate


• Links to democratic participation,
trust and accountability.
Current financing rules in NB
• Political financing regulated by PPFA
(Political Process Financing Act)
• Supervisor of Political Financing
oversees legislation
• NB is only jurisdiction in Canada to
have separate office from Chief
Electoral Officer overseeing political
financing.
Sources of financing in NB:
a mix of private and public
Private Public
• Contributions from: • Annual allowance (per
vote amount)
– individuals
• Election expense
– corporations reimbursement (per
– trade unions elector amount, up to
• Donations of property actual expenses)
and services (in-kind • Audit fee
contributions) reimbursement
• Political Contribution
Tax Credit (encourages
private contributions)
Current NB rules: Limits on Contributions
• Limit on Source: Only individuals, corporations and
trade unions may make a contribution.
– Corporations: only those which do business in NB
– Trade unions: only those locals which represent NB
workers
• Limit on Amount: During a calendar year a donor may
make a contribution not in excess of $6000 to:
– each registered political party, or registered district
association (or a portion between them) and
– one registered independent candidate.
Current NB rules: Limits on spending
“Election expenses”:
• All expenditures incurred during and before an
election period to promote or oppose election
of a candidate.
• Nomination convention expenses not subject to
spending limit (but still must be authorized by
official agent)
• Current formula for limit for a political party =
$1.53 times the number of electors in the districts
where the party has candidates.
• Current formula for limit for candidates = $2.67
times the number of electors in the district for
which the individual is a candidate.
Limits on spending (cont’d)
2003 general election calculated limits:
1) Limit on party’s expenses for a party with
candidates in all districts:
$1.53 x 551,149 electors = $ 843,258
2) Limit on total candidates’ expenses for a
party with candidates in all districts:
$2.67 x 551,149 electors = $1,471,567
(avg. of $26,755
per candidate)
Combined limit applicable to a party and its candidates:
$2,314,825
Limits on spending (cont’d)
“Non-election expenses” - expenditures outside of
writ period.
• Limit helps protect election period spending limits.
• In context of a fixed election date – parties are
limited in what they can spend on campaign
before the 28 day election period begins.
• In NB non-election period expenditures for
advertising or broadcasting undertakings, or in
newspapers, periodicals, or other printed materials
limited to:
– $35,000 per calendar year for registered political
parties, and
– $2000 per year for registered district associations
and independent candidates.
Current rules in NB: Disclosure
• PPFA requires disclosure of all sources of
revenue and all political expenditures.
• Annual financial returns by official
representative of each electoral district
association.
• Registered political parties submit
financial returns on a semi-annual basis.
• Statement of Election expenses must be
filed by candidates within 60 days
following election; by parties within 120
days.
Current rules in NB: Disclosure (cont’d)

• Name and address of all individuals who


contribute more than $100 must be
reported.
• If an individual makes a number of
contributions of $100 or less each, which
in the aggregate exceed $100, these are
subject to disclosure.
• Name of all corporations and trade
unions who contribute any amount must
be reported.
Current rules in NB: Disclosure (cont’d)
• Names of contributors and the amounts they
contributed are not published in annual
report of Supervisor of Political Financing, only
total amounts.
• Member of the public can go to Office of
Supervisor in Fredericton where annual returns
and sworn statements are available for public
examination.
• If don’t want/can’t go to Office, can make a
request to be provided specific information;
Supervisor has discretion whether or not to
provide it.
To whom do NB rules apply?
• PPFA does not apply to leadership campaigns
and nomination conventions, (although any
unused donations made to winner of
leadership or nomination contest must be
disclosed to the Supervisor.)
• Therefore, no limits on contributions and
spending for leaderships and nominations
• No publicly available information on who has
contributed to and how much was spent by
leadership or nomination contestants.
• Also - third parties are not subject to regulation
under the PPFA.
Public Financing of Political Process
Annual Allowance
• Paid out of the Consolidated Fund to all
registered political parties having seats in the
Legislature on January 1 or who ran 10
candidates in the previous general election.
• Based on number of votes cast for candidates of
each political party in last general election
(number of votes is multiplied by a dollar amount
calculated based on the Consumer Price Index.)
• Allowance must be used by parties to pay cost
of current administration, to propagate their
political programs and to coordinate the
political activities of their members.
Annual Allowance (cont’d)
2003 annual allowance:

PC $341,351
Liberals $239,982
NDP $ 56,401

source: Office of the Supervisor of Political


Financing
Public Financing:
Election expense reimbursement
• Candidates that received 15% of the
votes in an election (general or by-
election) are entitled to a reimbursement
from the Consolidated Fund based on a
formula. Reimbursement is paid to
candidates’ official agent.
• The reimbursement must not exceed the
actual expenses.
• The formula for 2003 is currently yielding a
value of $.90 per elector in the electoral
district.
NB Political Contributions Tax Credit
• A non-refundable income tax credit that
may be claimed by an individual or
corporation (a taxpayer) who contributes
to a registered provincial political party,
riding association or independent
candidate for election to the NB
legislature.
• A form of public financing of the political
process - income tax revenue is forgone
to encourage private political
contributions.
NB Political Contributions Tax Credit
(as of 2002):

Amount of Contribution Tax Credit


( to max of $500)
$200 or less 75% of contribution
More than $200 up to $150 plus 50% of
$550 contribution
exceeding $200
More than $550 up to $325 plus 33.3% of
$1075 contribution
exceeding $550
NB Political Contributions Tax Credit
1998-2002
1998 1999 2000 2001 2002 2003*

Value to $399,235 $494,251 $197,457 $195,793 $263,387 $419,572


Individuals

Value to $56,822 $128,203 $73,832 $50,739 $46,683 $110,917


Corporations

*Preliminary data for 2003


Source: “The Commissioner’s Annual Report to the Government of New
Brunswick”, Canada Revenue Agency and Tax Sharing Statements
How does NB compare with other
jurisdictions?
Limits on contributions:
• Amount: Compared to other jurisdictions, NB is
4th most restrictive.
• Source : NB is one of 8 jurisdictions that does not
restrict source of contribution.
Limits on spending:
• NB’s limit for parties is in middle of the jurisdictions
(range is .40 (NS) to $6.00 (PEI) per elector)
• NB is one of only 3 jurisdictions that limits
spending outside the election period (NB limit is
in middle).
How does NB compare with other
jurisdictions? (cont’d)
Disclosure of contributions:
• Range of minimum size of donation that
must be disclosed is $50 (NS) to $375
(Alberta). NB ($100) is on lower end of
range.
Public Funding:
• NB is one of 4 jurisdictions to provide parties
an annual allowance. Combined allowance
and reimbursement of election expense
give NB one of the more generous public
funding schemes of all jurisdictions.
The NB reality:
Source of contributions
1998-2001 averages
PC Liberal NDP

1% 1%
10%
0% 0% 5%

1%
Public 34%
35% 38% 39%
individ 38%

corps
unions
P&S
45%
27%
26%

Source – Annual Reports of Supervisor of Political Financing


The NB Reality – Election Spending
Election spending limits vs. amounts spent
Party 1995 1999 2003
election election election
Limit $1,857,153 $1,933,428 $2,314,825
PC Actual spending $1,156,666 $1,410,012
% under limit 38% 27.07%
Limit $1,857,153 $1,933,428 $2,314,825
Liberal Actual spending $1,447,106 $1,556,730
% under limit 22% 19.48%
Limit $1,857,153 $1,933,428 $2,314,825
NDP Actual spending $293,717 $287,860
% under limit 84% 85.11%
Source: Annual Reports of and information filed with Supervisor of Political Financing
Reforms in Other Jurisdictions
Federal Government
• Jan. 1, 2004, key changes to election financing laws
following passage of Bill C-24 (part of Prime Minister’s
Eight Point Action Plan on Ethics):
– Disclosure and registration requirements for political
entities extended to local associations, party
nominations and leadership contests.
– Limits put on political contributions ($5000 by
individuals; $1000 by corps)(no limits before).
– Contributions from unions and corporations to
political parties and leadership contestants banned.
– Registered political parties entitled to a quarterly
allowance based on percentage of votes obtained
in the previous general election. (no allowance
before).
– Maximum tax credit
increased from $500 to $650.
Manitoba
• 2001: NDP government prohibited contributions
by corporations and trade unions to political
parties, provincial candidates and constituency
associations and introduced a $3000 limit on
contributions by individuals (no contribution limits
in Manitoba before this).
• 2003: extended the $3000 contribution limit for
individuals and the ban on corporate and trade
union donations to leadership contests.
• Ban on corporate and union contributions had
negative impact in 2003 election on opposition
parties, who were unable to raise sufficient funds
from individuals to effectively challenge
government.
Quebec
• Since 1977: Right reserved to “electors” (not
corporations, trade unions, or interest groups,
and Quebec residents only) to make
contributions, from their own property, to
political parties and candidates up to an annual
amount.
• Public financial support for political parties was
increased and tax incentives put in place to
promote contributions by electors.
• Annual allowance is paid to parties. It is
computed by dividing among registered parties
a dollar amount based on number of electors in
Quebec. Each party’s share is proportionate to
the percentage of the valid votes obtained by
that party at last general election.
Banning Corporate and Union Contributions
Arguments for Arguments Against
•May reduce cynicism about •Impacts on parties’
politics and politicians and ability to operate, which
strengthens faith in integrity of could lead to a need for
process. increased public
•Ban on corp. and union financing to keep parties
contributions eliminates viable.
perception and possibility •Corporations and
corporations and unions can unions will find ways to
“buy” influence and that circumvent the ban (i.e.
governments and parties are company pays senior
beholden to special interests. employees bonuses for
purpose of making
political contribution.)
Regulating Leadership/Nominations Contests
Arguments for Arguments Against
•These are consequential matters –
sometimes are selecting Premier •Leadership and
•Public money goes into financing nomination
political parties - is appropriate to contests are
regulate “internal” activities of parties. private party
•Even if parties set internal regulations, matters.
they do not/cannot effectively •Parties can/do
enforce them; generally do not regulate
disclose financing information. themselves in
•Limits on contributions to these these matters.
contests would help prevent
perception/possibility that party
leaders and candidates are beholden
to special interests.
Regulating Leaderships/Nomination
Contests (cont’d)
Arguments for Arguments Against
•Some spending limit on these
contests would help ensure a
level playing field and may help
women and minority groups be
more competitive.
•Public disclosure of information
on contributions to/spending by
leadership and nomination
contestants would improve
transparency and provide voters
with more information on which
to base a decision.