Hidden Money

People or groups who donate to political parties are currently required to report the donation if it is over $1500 — a barrier against  hidden donations and lack of accountability, right? Wrong. In fact the rules on political donations are full of holes.

For a start, the $1500 is not cumulative — at least as far as reporting by the party receiving the donation goes. Over the course of a year, a party could receive $1499 a number of times from  a donor, and have no obligation to report it.

Donors are required to report donations which reach a cumulative total of more than $1500. However this is poorly enforced. Approximately 50 per cent of donors never submit the required forms.

The Australian Electoral Commission (AEC) writes to donors who fail to submit forms, but there is little they can do to force compliance. According to Kathy Mitchell of the AEC, the last time a donor was fined for either lodging a false return or not lodging a return was in the mid 1990s. As donors hear of this there is even less incentive to file donors’ forms.

Concern over the impact of donations on government decisions led us to commence a major research project on political contributions four years ago.

Each year the AEC releases donation information on all registered political parties for the proceeding financial year. We use this data to examine the amount and type of donations. The results of that work can be seen on our web site <www.democracy4sale.org>.

The task of donation reform has now become all the more urgent as, rather than acting on the AEC’s recommendations, the Liberal Party’s Senate strongman Eric Abetz and his colleague Nick Minchin now argue that electoral laws governing donations need to be further loosened. Abetz and Minchin say the limits at which disclosure of donations must be made should rise from $1500 to possibly $5000. This will lead to further problems in transparency of the source of funds for political parties. They also advocate a rise from $100 to $5000 for tax-deductible political donations.

Senator Minchin argues that raising the disclosure threshold is a move to protect the privacy of the donors. However, as Anna Johnston, chair of the Australian Privacy Foundation, stated in a recent letter to the Australian Financial Review about the Liberal Party’s proposal, ‘This is secrecy, not privacy. One hides corruption, the other exposes it’.

In order to get a better picture of the impact of changing the disclosure threshold from $1500 to $5000, we looked at the figures from the AEC for the NSW division of the Liberal Party for 2003Ð2004. This is the most current data on donations to the political parties that is publicly available.

Much more money flows to the state divisions of the major parties than their federal division. This is certainly the case for NSW. This is the reason we are using the NSW Liberals as an example.

In 2003Ð2004 the Liberals in NSW received a little over $9 million in contributions from individuals, companies and other organisations such as ‘associated entities’ (front organisations that raise money for political parties), and various lobby groups.

In our analysis we combined donations of money and gifts in kind with money spent at fundraising events. We believe it is important to consider all this money contributed to the parties since it fills their coffers for campaign purposes. We omitted other sources of income such as tax refunds and money received from the NSW State Electoral Office based on votes received in the 2003 state election.

Almost 54 per cent of the number of reported contributions were under $5000 and would not be made public if the threshold changes suggested by Abetz are passed by federal parliament. While these contributions account for only 11 per cent of the money contributed to the party that year, it means that almost $1 million would not be identified under the new disclosure proposal.

While some of these small donors were individuals, much of this money came from property developers, media companies, law firms and other businesses. A number of the individuals giving small amounts were also associated with various companies.

When we look further at the monetary breakdown of the $9 million the party received, 44 per cent of the money was from contributions of $5000 or above. Combining this percentage of money with the 11 per cent received from contributions between $1500 and $4999, this means that 45 per cent of the money the NSW Liberal Party received in 2003Ð2004 was still from unknown sources. While a small amount of that total could be from refunds on electric bills and payouts of insurance claims, most of the money was small contributions from unknown people and companies. This money would be from those who gave $1499 or less, perhaps a number of times during the year.

In summary, our analysis shows that had the threshold for declaring contributions been $5000 rather than $1500  in 2003Ð2004, 56 per cent of the   money (almost $5 million) received by the NSW division of the Liberal Party would have been from unknown donors.

The new proposed threshold for disclosure of donations is clearly a recipe for deception. If such a system were introduced, the public would have even less access to information about those who bankroll Australia’s political parties. The proposal by Abetz and Minchin is a major backwards step for accountability in this country.

The move to weaken disclosure rules for donations to political parties comes at a time when a number of top companies are reassessing their once generous ways. Lend Lease, BHP Billiton, National Australia Bank, Rio Tinto and AMP have all decided to stop donating to political parties. Some of their CEOs are reported to have said that they have decided that giving political donations is just not worth the grief they were getting from shareholders and the public. Maybe Abetz and Minchin are keen to change the disclosure rules before they lose too many more donors to Liberal Party coffers. In 2003 Malcolm Turnbull, who at that time was treasurer of the Liberal Party, stated that the new non-donation policies of many companies had cost the party $700,000 in potential donations during the previous year.

We believe campaigns against the potential corrupting influence of political donations led by the Greens and others have raised public awareness and concern. This in turn has caused many large companies to stop making donations to the political parties.

There are many prominent political leaders who have argued for disclosure rules to be tightened rather than weakened. Former ALP federal president Carmen Lawrence, former Prime Minister Paul Keating, former Labor NSW secretary Eric Roozendaal and NSW Liberal whip in the Legislative Council Don Harwin are all on the public record calling for tightening the present regime on party donations.

Even Turnbull, now one of the rising stars on the backbench of the federal Liberal Party, has recently called for banning all donations from businesses and unions. He argues that because of questions about vested interests and the ethics of big business and union contributions, donors should be restricted to people on the electoral roll. The amount individuals can donate should be capped. Turnbull’s position is one the Greens have taken for years.

If we want to maintain a vibrant and open democracy we must have complete transparency about the millions of dollars flowing into the coffers of our political parties and strongly oppose the moves proposed by Abetz and Minchin.

We believe an even more positive step would be to ban all corporate and union donations in order to protect our democratic institutions.

Lee Rhiannon is a Greens MP in the NSW Parliament. Norman Thompson is a retired academic who has led Ms Rhiannon’s  political donation project for the past four years. The full report can be read on <www.democracy4sale.org>.

Categorised: Against the Current

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