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  • New poll funding rule won't work

    Posted On February 12, 2017

    By Karan Thapar

    I guess it was bound to happen. Arun Jaitley’s steps to clean up political funding have met with a sharply polarized response. His admirers claim they are a far-reaching first step worthy of praise. His critics believe he is effectively pulling the wool over our eyes.

    So where does the truth lie? Perhaps it’s easier to answer that question if you examine Mr. Jaitley’s measures in terms of two criteria: do they make political funding cleaner, in other words with a great proportion of legitimate tax-paid funds? And do they make political funding more transparent, that is to say known to all of us?

    The decision to reduce the amount of money a political party can receive in cash from any one source from 20,000 to 2000 looks like a major step that should make funding cleaner. After all this is what the Election Commission asked for. But think carefully and the answer could be somewhat different.

    Political parties can still receive donations of up to 2000 and remember they are anonymous. No names need to be declared. So if cash donations above that sum are received all that political parties need to do is claim they came in smaller lots of 2000 or less.

    Because donations in cash have not been made illegal and because the veil of anonymity continues its quite possible, indeed likely, that the amount of money received in cash will remain unchanged, except it will now be claimed it came in donations of no more than 2000. I don’t see much cleaning up here nor any transparency.

    The other big step is the decision to create electoral bonds, issued by the Reserve Bank on cheque or digital payment, which can be credited to the authorized accounts of political parties whilst retaining the anonymity of the donor. Again, at first sight, this sounds like a great idea. But is it?

    First, to be honest, Mr. Jailtey has ensured a hundred per cent cleaning up. Because the bonds will be bought by cheque or digital payment they can only be bought by tax-paid and not black money.

    Alas, the second half of the story is very different. Because the anonymity of donors is guaranteed there will be no transparency. This breaches the principle that in a democracy we have a right to know who is funding political parties and with what amounts.

    In fact, the sad truth is by this measure Mr. Jaitley has actually diminished the transparency that used to exist. Up till now all donations above 20,000 had to be declared, which means the names of the donors were made public. Now, through these electoral bonds, the names of individuals or companies that make donations – be they 2001, 2 lakhs, 20 lakhs or 20 crore – will not be disclosed. This is undoubtedly a retrograde outcome.

    Perhaps the worst part is this is not something Mr. Jaitley accidentally overlooked but, I believe, his actual intention. As his budget speech said: “Donors have … expressed reluctance in donating by cheque or other transparent methods as it would disclose their identity.” So he’s chosen to protect their identity at the cost of transparency.

    One last point: why has the provision by which political parties are exempt from income tax payment not been repealed? Quite simply, why should political parties be treated differently to the rest of us?

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