MONEY FOR POLITICAL PARTIES, OH DEARPOLITICAL PARTY FUNDING INVOLVING (FORMALLY ABOLISHED) PUBLIC CONTRIBUTIONS AND PRIVATE DONATIONS: HOW DOES IT WORK AND HOW WILL IT EVOLVE

September 2016

AN INSURANCE POLICY FOR DEMOCRACY

“Any citizen has the right to freely establish parties to contribute to determining national policies through a democratic process” (Art. 49 Italian Constitution).“Parliamentary Groups (...) shall be provided with the resources required to perform their functions” (Art. 13 Rules of Procedure of the Chamber of Deputies) as well as “a single annual contribution varying according to the size of the membership of each Group” (Art. 16. Rules of the Senate).Public funding of political parties is considered a bastion of democracy.Allocation of State resources to political parties is the mechanism used to ensure citizens’ right to participate in the politics and government of their community as well as ensure equal, guaranteed and transparent rights for all.

Collusion and corruption impact enormously on public opinion: political party funding is one of the symbols of a party power and no longer a tool to defend civil liberties.Law 13/2014 regarding the abolition of direct public funding was approved on 21 February 2014. Article 1 recites: “election reimbursements and public funding allocated for political activities and considered as co-funding are abolished”.

2014: A NEW PERSPECTIVE

So?Starting in 2017 political parties will have to rely primarily on private resources (individuals, associations, businesses) in order to participate in elections and afterwards finance their everyday activities. The change is more than revolutionary, at least on paper; in fact, abolishing election reimbursements will not automatically put an end to public party funding: more on this further on.

THE EARLY DAYS OF PUBLIC FUNDING

1958 Luigi Sturzo proposed a Draft Law establishing public funding for political parties in an attempt to stem the repeated scandals which, ever since the foundation of the Republic, had seen numerous political representatives accused of a less than transparent use of private funds.He stated: “When income and expenses are surrounded by secrecy regarding how they were come by and how they were spent, corruption goes unpunished”.The proposed legislation was never approved by Parliament.

IN 1974 THE CHRISTIAN DEMOCRAT PARTY SUCCEEDED

This was the first regulation regarding political funding in Italy; it applied to both parliamentary groups and election activities.

1974

Flaminio Piccoli, a Christian Democrat MP, proposed the Draft Law “State Contribution to political party funding”. The so-called Piccoli Law (L. 195/74) was approved by a large majority in a mere 16 days. Only MPs from the Liberal Party voted against it.

FUNDING IS INSUFFICIENT, LET’S INCREASE IT

1981 The amount of party funding was increased considerably (L. 659/81) but with a caveat: a requirement was introduced whereby parties had to present an annual financial report regarding income and expenditure – theoretically useful, but practically useless since the Law did not include any sort of control.In addition, parties (and their members) were forbidden to receive funding from the public administration, public authorities, publicly participated authorities or semi-public agencies.

1978The Liberal Party proposed a referendum to repeal the Piccoli Law, but did not succeed in obtaining the necessary quorum.

1993Still reeling from the Tangentopoli (i.e. Bribesville) cyclone, the Italians were asked to once again vote on the Piccoli Law (this time the referendum was proposed by the Radical Party). The Italians voted overwhelmingly (90.3%) in favour of abolishing public party funding.

THE FIRST SIGNS OF DISCONTENT

BACK TO SQUARE ONE?

1993

A few days after the referendum the Amato government established a contribution for election expenses: € 0,83 per citizen, even if the latter was ineligible to vote. The money was to be distributed to the political parties as reimbursement for expenses incurred.

Thanks to this new system, in 1994 political parties were assigned the equivalent of € 46,9 million for the national elections, plus € 23,4 million for the European elections held that same year.

THE FINAL RE-INTRODUCTION

sheet and a profit and loss statement, which was then checked by the Presidency of the Chamber of Deputies; the election expense report was submitted to and controlled by the Court of Auditors.In 2012, Law 96/2016 tightened economic control over the political parties; it established that only parties or movements with a statute were eligible to receive election reimbursement.

1997Approval of Law 2/1997 “Regulations governing voluntary contributions to political parties or movements”. The Law allowed citizens to allocate ‘four per thousand’ of their income tax to political parties and movements (but they couldn’t indicate which party!) That year a transitory regulation was introduced giving parties a fund of the equivalent of € 82.633.000, but just for 1997. The obligation to provide an annual financial report was reinforced: each party had to draft an annual budget, including a balance

ESTABLISHING A COMPLEX SYSTEM

1999 Five election expense reimbursement funds (L. 157/1999) were created for:

the Chamber of Deputiesthe Senate of the Republicthe European ParliamentRegional CouncilsReferendums

The sum reimbursed to the above institutions did not depend on the expenses actually incurred during the election campaign (as a result all the parties received more than they spent). However, to be able to use the funds parties/movements had to obtain at least 1% of valid votes (against the 3% established under the previous regime). To encourage gender equality any party receiving reimbursement was obliged to allocate 5% of the funds to initiatives intended to enhance the inclusion of women in political life.

AND IT’S STILL CALLED REIMBURSEMENT

The paradox of sums assigned to disbanded parties: that year all political parties received the funds of the unfinished legislature and the legislature that had just begun. That’s not all: as it stood, the regulation assigned funds to parties that no longer existed: the Democratici di Sinistra (DS), Alleanza Nazionale (AN) and Forza Italia.

Further revision of the regulations made election reimbursement “annual”, in other words, allocated every year whether or not there were elections. In 2006 Law 51/2006 specified that election reimbursement was to be assigned for each of the five years of the legislature, irrespective of how long it actually lasted. And so thanks to early elections in 2008 political parties benefited from a double revenue.

to ensure transparency and control over the statement of accounts” (L. 96/2012). The law slashed the total amount of reimbursement to political parties by fifty percent.

A COMPLAINT AND THE FIRST SIGNS OF BACKTRACKING

In March 2012 the GRECO (GRoups d’Etats contre la COrruptions/Group of States Against Corruption) produced a document regarding transparent political party funding in Italy. The document revealed several anomalies, starting with numerous cases of false or incomplete statements of accounts. That same year the Monti government approved the Law “regarding the reduction of public contributions for parties, including several measures

NO MORE ELECTION REIMBURSEMENTS

On 13 December 2013 Prime Minister Enrico Letta posted a Tweet: “In April I promised to abolish public funding for political parties within a year. I confirmed that intention Wednesday”.Decree-Law dated 28 December 2013, later converted into Law 13/2014, envisages the abolition of direct public funding, in other words the end of election reimbursements starting in 2017.

(NOT SO) RESIDUAL FORMS OF PUBLIC FUNDING

The new Law established a system based on voluntary contributions and forms of indirect contributions and non-monetary benefits.In particular, a favourable tax regime and the option for taxpayers to give ‘two per thousand’ of their own personal income tax (IRE) to political parties.Liberal monetary disbursement to political parties triggers a reduction in the gross income tax of natural or legal persons.

POLITICAL PARTIES ENTITLED TO PRIVATE FUNDING

Political parties are entitled to private funding if:one of their representatives has been elected either to the Chamber of Deputies, the Senate, the European Parliament, a Regional Assembly or the Assembly of the Independent Provinces of Trento and Bolzano;during that same election parties presented candidates in at least three constituencies for election to the Chamber of Deputies, or in at least three Regions for the renewal of the Senate or a regional Council/independent Province.

Those parties are entitled to share in the annual allocation of ‘two per thousand’ of the personal income tax if the taxpayer specifically expresses his assent in his income tax return.

OTHER FORMS OF TAX RELIEF

Parliamentary allowance. It is an established practice that Mps give part of his allowance to their political party; nevertheless, this contribution can be considered a donation and deducted from taxes. This is a form of – double - public funding because the contribution comes from the public purse and triggers tax relief (i.e., loss of income into the public coffers in favour of political parties).VAT reduced to 4% for expenses incurred by parties and candidates during an election campaign: printed material, propaganda, office rental, rallies, purchase of web publicity.Reimbursement for so-called self-managed messages, free for the party and candidate, but paid to the State broadcasting station.

THE MISSING LINK: FOUNDATIONS

In the Italian legal system there is no single, systematic regulation governing funding of political Foundations.The Law passed in 2004 partially rectified this legislative void by extending the regulations regarding transparency and public disclosure of statutes and statement of accounts to all entities (associations, foundations, etc.) in which the governing bodies, either completely or in part, are chosen by parties/political movements.

TOWARDS NEW SCENARIOS

Some sort of public funding of parties and political life is, generally speaking, a system adopted by most European countries (except Malta where there is absolutely no form of State funding), while in the rest of the world this system is very patchy. The most consolidated private system used to fund politics is the one adopted in the United States where the lion’s share of resources comes from small donations by individual voters, fundraising, etc., but also to a lesser degree from businesses and associations. This proves that in the USA funding one’s own political party is considered almost a civic duty rather than a way to influence decision-making processes in order to reap personal benefits. Is Italy veering towards the American model? Although this trend us a long way off, private funding of parties and political life is gradually gaining ground.

THE BASIC PROBLEM

We’ve unconsciously absorbed the idea that party funding is a waste of public money.But without a cap on contributions by private entities how will we avoid big contributors from dictating the political agenda?Perhaps this is what we should think about when we cite the “undue” influence exerted by economic interests in political choices: a Lobby register... my foot!

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