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m'- LAWLIBRARY OFCONGRESS CAMPAIGN FINANCING OF NATIONAL ELECTIONS IN FOREIGN COUNTRIES Prepared by the Staff ofthe Law Library Ruth Levush, Coordinator Law Library ofCongress April 1991 LL91-8 Digitized by the Internet Arciiive I 2009 in bampaigntihancmOOIevu CAMPAIGN FINAiNCING OF NATIONAL ELECTIONS IN FOREIGN COUNTRIES Prepared by the Staffof the Law Library Ruth Levush, Coordinator Law Library ofCongress April 1991 LL91-8 • Abstract: Campaign Financing of National Elections in Foreign Countries surveys the laws regulating campaign financing in 19 countries, including direct and indirect funding by both governments and private contributors and covers restrictions on contributions, limits on campaign expenditures, regulationofbroadcastadvertising,andmethodsofenforcingrequirementsconcerning accountability reporting for money spent. Forfurtherinformation, call: Ruth Levush, 7-9847 CAMPAIGN FINANCING OF NATIONAL ELECTIONS IN FOREIGN COUNTRIES CONTENTS CAMPAIGN FINANCING: A COMPARATIVE STUDY 1 Ruth Levush AUSTRALL\ 25 Robert L. Nay CANADA 39 Stephen F. Clarke GERMANY 51 Edith Palmer GREAT BRITAIN 63 Kersi B. Shroff GREECE 75 Theresa Papademetriou INDIA 84 Krishan S. Nehra ISRAEL 95 Ruth Levush ITALY 110 Giovanni Salvo JAPAN 116 Sung Yoon Cho MALAYSIA 128 Mya Saw Shin MEXICO 137 Rubens Medina NETHERLANDS 145 Karel Wennink SWEDEN 147 Fariborz Nozari TAIWAN 152 ConstanceA. Johnson and Tao-tai Hsia THAILAND 158 Phuong-Khanh Nguyen TURKEY 164 Belma Bayar APPENDIX BULGARIA 170 Ivan Sipkov POLAND 176 Bozena Samecka-Crouch THE SOVIET UNION 187 ZigmasA. Butkus EUROPEAN COMMUNITY 189 Karel Wennink BIBLIOGRAPHY 192 Marie-Louise H. Bemal CAMPAIGN FINANCING OF NATIONAL ELECTIONS IN FOREIGN COUNTRIES A COMPARATIVE STUDY I. Introduction The availability of financial resources to political parties may have a tremendous impact on the electoral process in democratic regimes; so powerful in fact, that in some cases, it may influence what we consider as the democratic nature of the election itself. If a ruling party holds a considerable bureaucratic advantage over the opposition parties and benefits from superior access to material resources and funds, there is no doubt that the principle ofequal political opportunity is compromised.' Similarly, if political success is achieved primarily through monetary advantage, the principle may alsobe threatened. Moneyfrom political donations can influence and even control the flow of information, which could be detrimental to well informed voting. Herbert E. Alexander, in his article "Money and Politics: Rethinking a Conceptual Framework"^ states that: "The distinguishing characteristics of money are that it is transferable and convertible without necessarily revealing its original source. The convertibility ofmoney is of particular advantage in politics...." Due to this and similar concerns, a number of countries have instituted a system ofgovernment fundingofelectoral campaigns. Thejustification for such funding may be that it should lead to more competition since itwill enable candidates or parties that lack monetary resources to more equally compete in a national election. Equality of electoral opportunity can only be achieved if the mechanism used for such governmental funding includes some safeguards against misuse of power by the governing party or person. The dangers inherent in public funding include the possibility of "institutionalization of existing party systems, generally favoring central party organizations over local ones, freezing relationships among major parties or dominant coalitions, or locking out new or emerging movements while maintaining current parties in existence perhaps after their support has diminished."^ Whether the governmental funding takes a direct or an indirect form (such as free broadcasting time, tax incentives for political contributions, or other means), there should be safeguards to insure the equitable distribution ofsuch funds. In dealing with the issues involved with government funding legislation in the surveyed countries, the following questions have been raised: • Should new parties or candidates get financing? ' See country reports for Bulgaria and the Soviet Union. ^ Comparative PoliticalFinance in the 1980s, 9 (1989) . ^ K. Paltiel, " Public Financing Abroad, Contrasts and Effects", in Malbin M. Parties, Interest Groups and Campaign Finance Laws 364-370 (1980). LAWLIBRARYOFCONGRESS -2 • Should the taxpayer have to finance the campaigns of losing parties or candidates, or do the losers themselves have to be responsible for the risk they took? • Should the taxpayer have to finance the campaign of a party he does not support? • What kind of accountability should be required ofthe recipients? • Should there be mandatory auditing of these funds or do disclosure or certain bookkeeping requirements and the general penal law of the country suffice to maintain a clean financial campaign? • Should there be a limitation on campaign expenditures?'' Each country has taken different approaches to these aspects of governmental funding. All of the countries surveyed allow non-governmental funding, although some imposed ceilings on the amount of contributions or expenditures permitted from such sources. Some countries, fearing foreign intervention in their internal affairs, either prohibited or limited foreign contributions. The comparative analysis that follows is intended to explore the methods of regulating campaign financingwhich are used in selected countries in theworld, theways they arecarried out and the attitudes of different legislatures toward appropriate penalties for their violation. The countries included are: Australia, Canada, Germany, Great Britain, Greece, India, Israel, Italy, Japan, Malaysia, Mexico, the Netherlands, Sweden, Taiwan, Thailand, and Turkey. Reports on campaign financing in past or present communist countries undergoing electoral reforms (Bulgaria, Poland, and the Soviet Union) as well as a report on financing elections for the European Community Parliament are appended. Although not included in the comparative analysis, it was felt that the great interest generated by the new electoral reforms and the anticipation for 1992 new European orderwarranted their inclusion. II. Government Funding A. Direct Funding Only about halfof the countries surveyed award direct funding to parties or to candidates competing in the election. Thesecountries are: Australia, Canada, Germany, Greece, Israel, Italy, Mexico, Sweden, Taiwan, and Turkey.^ * In the United States, limitations on contributions have been upheld by the Supreme Court, but amounts expended by candidates and parties may not be limited without violating the first amendment rights of the Constitution [Buckley v. Valeo, 424 U.S. 1 (1976)]. ^ See Table No. 1 for details. LAWLIBRARYOFCONGRESS-3 The laws ofthe countries that providesuch direct funding usually require a minimum share of votes as a condition for the receipt of the funds. This minimum share, subject to other conditions, varies as follows: 0.5 percent of the total vote in Germany, less than 1 percent in Israel, 1.5 percent in Mexico, 2 percent in Italy, 2.5 to 4 percent in Sweden, 4 percent in Australia, 3 to 6 percent in Greece, 7 percent inTurkey, 15 percent in Canada and 75 percent ofthe needed votes for election in Taiwan. There are two basic systems for the distribution of direct governmental funds. The first one, adopted by Canada and Australia, bases the funding on itemized accounts of qualified expenditures. The second system, found in other countrieswhich provide direct funding, bases the funding on a flat-rate formula, usually taking into consideration the percentage of valid votes received in the election. However, the latter formula is not applied in certain cases. In Germany, for instance, the amount ofgovernmental funding is limited to the total income ofthe party from othersourcesover a four-year periodstarting from thesecond calendaryear followingthe granting ofcompensation. The German rule, enacted in 1984, is based on the philosophy that the parties should not be preponderantly funded by the government.* B. Indirect Funding Some form ofindirect funding exists in all the countries surveyed. Japan, which does not allow direct funding, subsidizes more campaign-related activities than any other country in the survey. Among such activities are: transportation during the election campaign, free mailing, making of posters and establishment of ofOcial sign boards for displaying them, placement of newspaper advertisements, free broadcasting, arrangement of public meeting places where candidates can give speeches, publication ofelection bulletins that contain data on the candidates, and tax benefits for political contributions. 1. Broadcasting Mostcountries,eventhoselimitinggovernmentinvolvementincampaignfinancing,subsidize the broadcasting of political advertisements.^ The free broadcasting policy seems to take into consideration that broadcastingis the mostexpensivecomponent in political campaigns throughout theworld. Even in the United States, where the law does not prescribe free broadcasting, it does require stations to charge political candidates the lowest advertising rate charged for their best commercial clients.* In countries where broadcasting time is free, the greatest problem has been the allocation of time. Granting equal amounts of time to each party might encourage the formation ofsplinter groups; on the other hand, the system where time is given in proportion to * For specific information with regard to government direct funding,see table No. 2 following this analysis. ^ See Table No. 3 for details. " 47 U.S.C. § 315(b)&(c) 9 (1988). LAWLIBRARYOFCONGRESS -4 the number ofseats won orvotes received at the previous general election favors the status quo.' A certain compromise was reached in Israel where each party, including those which were not represented in the previous parliament, is given ten minutes and each party already represented in the outgoing parliament receives three additional minutes for each member in the parliamenL Aspecial problem arises in mixed publicandprivatebroadcastingsystems,such asCanada's. There the problem is resolved by allocating a fixed amount of prime time (six and a half hours) on all networks and stations for all parties for a four-week period prior to the polling day. This total is then divided among the registered parties by their agreement; and, if such an agreement cannot be reached, the time allotments are allocated by the government-appointed Broadcasting Arbitrator." 2. Other Indirect Subsidies Only Australia, Israel, and Japan indirectly finance the transportation of voters or candidates during theelection period. OnlyGreatBritain, Japan and Mexico indirectlyfinance the postal charges ofelection publications. Japanese law further grants the right to a limited number of free newspaper advertisements during the election period. Swedish law, on the other hand, permanently subsidizes newspapers. This is done because the major Swedish daily newspapers are each affiliated with a political party, and the subsidies to the newspapers are intended to promote the supply of information which is so vital to a democracy. 3. Tax Benefits for Contributions Another method ofindirect governmental financing adopted byseveral countries is through special tax benefits to private contributors or to parties or candidates. By forfeiting the taxwhich is due to the state, the government indirectly funds the parties or the candidates. The amount of indirect funding equals the amount which would have been paid had no exemptions or credits applied. Countries providing such tax benefits are: Canada, Germany, Japan, Mexico, the Netherlands, Taiwan, Thailand, Turkey, and Great Britain (only on inheritance). In most ofthese countries there is a ceiling on the amount that can be deducted; in the Netherlands private donations are tax-deductible provided they comprise at least one percent but do not exceed ten percent of a person's gross annual income. In the case of corporations, donations are tax deductible only if they exceed 500 guilders but comprise not more than six percent of the total profit. Germany's law limits the deductibility of both individual and corporate contributions to DM 60,000 (40,000U.S. dollarsequivalent). InJapan, politicalcontributions madebyan individual should exceed 10,000 yen (76 U.S. dollars equivalent) in one year in order to be deducted from the person's total income for the taxable year. Canada awards benefits in the way of tax credits ' Paltiel, supra note 3, at 361. '° Broadcasting ofpolitically related news may pose some delicate questions. In some cases, freedom of information may be misused by way of creating the news events themselves for additional publicity. A determination in these cases is a task for the courts, see country report on Israel. For further information on paid and freepolitical broadcasts in various countries,see Table No. 3.