Electoral Financing and Democracy

Publication Date: 
8 Jul 2015

News Type:

In democracies all the over the world, the role of money in politics is a controversial and often polarizing issue. While political financing is a necessary component of any election, regulating (or de-regulating) such financing can be a difficult balancing act and potentially impinge upon citizens’ ability to have a voice. Public financing is both pervasive, with most countries in the world providing some type of public funding, and varied, as democracies and authoritarian regimes regulate political finance laws and implement public funding in a host of different ways. In the United States, public funding for campaigns played a role in every presidential election between 1976 and 2008. At a conference sponsored by Brazil’s Superior Electoral Court on “Electoral Financing and Democracy,” the International Foundation for Electoral Systems’ Senior Political Finance Adviser, Magnus Ohman, discussed the different ways public funding is regulated and implemented and provided recommendations for improving political financing.

Ohman began his presentation by noting that provisions for direct public funding exist in over two-thirds of the countries in the world. It is very rare, however, for States to only allow public funding by banning private donations to parties and candidates. According to Ohman, most of States that ban private donations are not democratic, allowing parties in power to exploit State resources and gain a significant advantage over opposition parties. On the other hand, only a few countries have experimented with allowing only public funding, such as Tunisia did for its 2011 Constituent Assembly election. In 2014, Tunisia abandoned this financing system, as it ultimately led to parties still receiving private funds and simply concealing the donations. Overall, mixed models, allowing both public and private financing, dominate throughout the world.

Apart from direct public financing, almost 90 percent of countries in the world provide indirect financing. Free or subsided access to the media for announcements and advertisements is the most common type of such indirect public funding. Additionally, some countries provide tax relief to political parties and/or to those who make contributions to political parties. According to Ohman, tax relief for donations, up to a certain point, can have to distinct advantages: 1) it provides an incentive for people to make donations, even if they are small, and encourages parties to seek smaller donations from citizens and 2) it will likely increase the probability that people will report that they have actually made a donation, as they will want the corresponding tax relief.

Although most countries provide direct or indirect public funding, the amount provided is often too small to make a major difference. Looking to Africa, public funding is used in nearly two-thirds of the countries on the continent, yet it is only sizeable enough to matter in a few countries, led by South Africa. However, the situation in Europe is dramatically different, where public funding for political parties accounts for 65-70 percent of party income. In some cases, almost all the money utilized by a political party comes from the State budget. One problematic outcome of such public financing schemes is that it can lead to a disconnect between voters and parties, as the parties are increasingly less dependent on voters for income.

In a small, but growing number of countries the provision of public funding has been tied to gender equality. The most common approach is to give more direct public funding to parties that reach a certain threshold of female candidates, or alternatively to deny funding to parties that do not reach a specific benchmark. According to Ohman, it is too early to measure the impact of such efforts in most cases, as these reforms have only been recently implemented.

Ohman concluded his remarks by discussing what he views as the most important regulation in regards to political and electoral financing: requirements for political parties and candidates to submit financial reports. These reports should be made public with minimal restrictions to maintain the privacy of those making small donations.