Should donations to political parties stay above scrutiny?

Financial politics: It’s time to make money laundering machinations of political parties above board

Prime Minister Narendra Modi’s November 8, 2016, demonetisation ‘faux pas’ will indeed go down as a landmark in the history of India since Independence. However, the demonetisation drive has left several loose ends that warrant answers. Significant amongst them is, should political parties be exempt from black money scrutiny?

A fresh twist to the debate on the issue of transparency in political party funding is triggered by the Supreme Court’s decision on January 11 to dismiss a PIL against the exemptions granted to political parties.

In aftermath of post-demonetisation, Revenue Secretary Hansmukh Adhia had raised much brouhaha and triggered off a fierce debate. Adhia had said in a media statement that under the 13 A clause of IT Act, 1961 donations to political parties are exempt from taxes and the deposits will not come under vigilance. This came subsequent to Finance Secretary Ashok Lavasa who added insult to injury by stating that political parties can deposit 500 and 1,000 currency notes till December 30 in banks and till March-end in the Reserve Bank of India. This later led to Finance Minister Arun Jaitley to go on the defensive, who clarified that with the new amendment of the IT Act on December 15, political parties are not exempted from taxes.

Amidst a larger public outcry on endless queues, empty ATMs, daily alterations in government notifications and unearthing of crores of blackmoney — there is a need for a relook towards making money laundering machinations of political parties above board. Jaitley’s statement had come as a face saving act for the Modi government, but the fact remains that there is still much to be done to restrain political parties doubling up as machines of laundering black money in India.

The December 15 amendment may just act only as a cover-up. Many parties are in a rush to show black money with back-dated receipts

In this direction, the December 15 amendment may have come just as a cover-up. It has been learnt that many political parties are in a rush to show the back dated receipts (black money) — before December 15 to escape the tax penalty. Political parties funding are also exempt from declaring the sources of funds. Thus donations amounting to less than 20,000 can be made in cash to any party.

Donors or blackmoney owners have issued innumerable batches of 20,000 donations to avoid scrutiny. For instance, and ridiculously, the contribution list of BSP shows no contributions over 20,000 for 2015-16. A total of 1,330.59 crore of donations to political parties between 2015 -16 had no identification.

BJP’s list of contributors above 20,000 a total of 166 crore collections for 2014-15. For Congress, it stands at 66 crore. Furthermore, the parties have also resorted to cash payments and avoid cheque or drafts payments for their expenses, including those running into crores for campaigning and hiring PR agencies. So apart from doling out favours or returning favours after their wins in an elections, many political parties are becoming the biggest conduits to turn black into white as well as re-generate black money as the donors seek benefits and exemptions.

The Election Commission (EC) has been calling for more transparency in party funding for long. Even though the EC’s present statutes provide a certain ceiling on expenditure for candidates in election campaigning —up to 28 lakh for assembly polls and up to 70 lakh for Lok Sabha polls, there is, however, no limit on party expenditure on election campaigning.

Unlike in the US and in the UK where there is a clear limit on expenditure on campaigning by candidates. On similar lines, the candidates spend many times over and above the stipulated limit by taking advantage of the several loopholes and resorting to accounting “window dressing”. The Law Commission as well as several Parliamentary Committee Boards have pointed out towards this. Political parties have even resorted to foreign funding despite restrictions.

Political party funding law was tweaked in 2003. A classic case is of funds from Anil Aggarrwal owned foreign companies, given to Congress and BJP violating the Foreign Contribution Regulation Act (FCRA). Subsequently, till date no action has been taken though the Delhi High Court has convicted the two. The Home Ministry dilly-dallied by saying that FCRA is not in its jurisdiction. Subsequent to the November 8, 2016 announcement, political parties such as Samajwadi Party, Bahujan Samaj Party and Congress had to slash their expenses. They even had to cancel many of their public rallies which they had planned before November 8. Almost 85 per cent of political party funding comes in this non-transparent way from individuals and corporate houses despite the EC’s stipulations. By July 2015, there are 1,866 political parties in India as per the EC. Only 464 political parties had fielded candidates in the 2014 Lok Sabha elections. And almost two-third of them do not run for elections.

In the RP Act of 1951, though political parties enjoy several exemptions in terms of unlimited funding, office premises in prime areas or locations and free airtime and subsidy in government-owned media. Several committees and expert groups, including those under Inderjijt Gupta and Dinesh Goswami have favoured state funding of bonafide candidates campaigning to fight elections. But then this would hamper unbiased elections and are feared to promote states’ vested interests.

Of late, the EC has proposed that all parties declare their all-party funding or contributions over 2,000 and give tax exemptions only to those who win elections comes in line with its move to provide for transparency even though it’s likely to be sabotaged by the political parties. Apart from the various committees suggesting Electoral Reforms such as state funding of candidates another possible solution that is fast doing rounds is the one suggested by Modi himself — holding the assembly and Lok Sabha elections simultaneously. So much for starters.