funding of political parties and election campaigns

Funding of Political Parties
and Election Campaigns
A Handbook on Political Finance

Funding of Political Parties
and Election Campaigns
A Handbook on Political Finance

Editors:
Elin Falguera
Samuel Jones
Magnus Ohman
Contributors:
Julie Ballington
Elin Falguera
Muriel Kahane
Juan Fernando Londoño
Karl-Heinz Nassmacher
Magnus Ohman
Daniela R. Piccio
Fredrik Sjöberg

Daniel Smilov
Andreas Ufen
Daniel Zovatto

Political Parties, Participation and Representation
© International Institute for Democracy and Electoral Assistance 2014
International IDEA
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Tel: +46 8 698 37 00, fax: +46 8 20 24 22
E-mail: info@idea.int, website: www.idea.int
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Graphic design by: Turbo Design, Ramallah
Cover illustration: © Ellen Isaacs
Printed in Sweden

ISBN: 978-91-87729-24-9

Foreword
Over the course of my career, I have witnessed the negative impact of money
on politics and governance. here is increasing evidence that corruption
and unregulated donations are exercising undue influence on politics and
undermining the integrity of elections. In some countries, money from
organized crime has infiltrated politics to gain control over elected officials
and public institutions. hese threats to democratic politics help explain why
large numbers of people around the world are losing faith in politicians and
democratic processes. For example, recent research shows that more than
two-thirds of Americans trust government less because of the influence of
big donors.1
he need to regulate uncontrolled, undisclosed and opaque political finance
was identified by the Global Commission on Elections, Democracy and
Security2 as a major challenge to the integrity of elections in emerging
and mature democracies alike. he Global Commission argued that
poorly regulated political finance can diminish political equality, provide
opportunities for organized crime to purchase political influence, and
undermine public confidence in elections. Indeed, a failure to regulate

political finance threatens to hollow out democracy and rob it of its unique
strengths.
Citizens all over the world want political parties and governments to represent
their views and be responsive to their needs. However, all too often parties
are disproportionately representative of the interests of the donors who have
largely financed them. If large corporations and rich individuals are able to
buy greater influence through large campaign donations, then citizens can lose
faith in, or be marginalized from, the political process. his is compounded
by a lack of citizen participation in political parties, which further adds to
people’s alienation from politics.
Although the funding of electoral campaigns and political parties has an
important role in the functioning of democracy, unregulated money in
politics means that the political playing field is not level. he explosive growth
in campaign expenditures fuels the perception that wealth buys political
1

Brennan Center for Justice Research referred to in the report of the Global Commission on
Democracy, Elections and Security (2012, p. 34).

2

he Global Commission on Elections, Democracy and Security was established as a joint initiative
of the Kofi Annan Foundation and the International Institute for Democracy and Electoral
Assistance (International IDEA). he Commission’s 2012 report, Deepening Democracy: A Strategy
for Improving the Integrity of Elections Worldwide, can be downloaded at http://www.globalcommission.org/report
III

influence and threatens political equality. he abuse of state resources by
the ruling party to put itself in an advantageous position also remains a
problem in many countries. his lack of a level playing field prohibits the
equal participation and representation of all citizens in democratic political
processes.
Recent years have seen a growing penetration of transnational organized
crime and illicit funds into politics. In Latin America, West Africa and
in many other parts of the world, opaque electoral finance and lack of
transparency and oversight are providing opportunities for organized crime
to gain influence over elected officials by financing their campaigns. his not
only undermines democracy, good governance and the rule of law, but also
has negative consequences for economic development and the alleviation of
poverty.

here is clearly an urgent need to better control political finance. Governments
should regulate political donations and expenditures effectively. his will
require full transparency and disclosure of donations, with penalties for noncompliance. Effective monitoring and enforcement of regulations are also
crucial.
his new publication from International IDEA on political finance around
the world is a timely and much-needed contribution to the field of democracy
support. It builds on International IDEA’s previous work and provides
a better understanding of the current state of political finance regulation.
It also offers recommendations on reforms for a range of stakeholders and
provides concrete suggestions for future research. hrough sharing global
practices in the field of political finance, this handbook is an important step
in safeguarding the integrity of elections and of democratic politics.

Kofi A. Annan

Chair, Global Commission on
Elections, Democracy and Security

IV

Preface
Democracy is a system in which the government is controlled by the people,
and in which people are considered equals in the exercise of that control.
However, unequal access to political finance contributes to an uneven
political playing field. he rapid growth of campaign expenditure in many
countries has exacerbated this problem. he huge amounts of money involved
in some election campaigns makes it impossible for those without access to
large private funds to compete on the same level as those who are well funded.
here is no doubt that political parties need access to funds in order to play their
part in the political process. At the same time, the role of money in politics is
arguably the biggest threat to democracy worldwide today. his threat is clear
across all continents—from huge corporate campaign donations in the United
States and drug money seeping into politics in Latin America, to corruption
scandals throughout Asia and Europe. Evidence shows that large portions of
the electorate around the world are left with the perception that their politicians
are more concerned about money than about representing citizens’ interests.
Recognizing the many challenges of money in politics and the gap in
comparative knowledge, International IDEA has been focusing on the topic
for over a decade and has worked on a broad range of activities, including
stimulating national debates on legal reforms, building institutional capacity

and producing global comparative knowledge. his handbook builds on
the 2003 International IDEA handbook Funding of Political Parties and
Election Campaigns and is unique in its global scope. By offering an overview
of political finance around the world, its aim is to advance the debate and
stimulate action to improve the role of money in politics.
here are a myriad of problems related to money in politics: financial scandals, the
abuse of public funds, drug cartels’ supply of illicit money to parties, and private
corporations funnelling vast sums to party figures in order to garner favours.
Women candidates in particular suffer disproportionately from lack of
access to campaign finance. In many countries, unfair allocation of public
funds distorts the playing field in favour of ruling parties. his abuse of state
resources is particularly problematic in former Soviet countries and Africa.
It is common for money in politics to operate behind closed doors and involve
shadowy practices. he exact amounts and origins of donations to political
parties or candidates are often unknown. his creates a system that is open to
abuse by big business or organized crime, which contributes money in return
for influence. Donations seen as an investment by corporate interests have
been reported from virtually all regions, not least the older democracies of
V

North America and Europe. he penetration of illicit funds into politics poses
a particular danger to democracy and its institutions on all continents. his
is especially so along the Latin American drug-trafficking corridor stretching
from the Andean region to Mexico, where drugs money has infiltrated
political life and elections.
In all regions of the world there is a deeply worrying trend of money in politics
drowning out the voices of ordinary citizens. For a democracy to be healthy,
it must revolve, first and foremost, around the citizen. And for a democracy
to be sustainable, it requires transparent, accountable and inclusive political
parties that can channel the demands of the people and truly represent them.
Attempts to tackle these challenges through political finance laws and
regulations are often undermined by a lack of political will or capacity, as
well as poorly designed and enforced measures.
his handbook addresses these and other problems of money in politics by
analysing political finance regulations around the world and providing guidance
for reform. he chapters are divided by region; each assesses the current state of
regulations and challenges and offers a series of recommendations to tackle the
identified shortcomings. his geographical approach has the benefit of revealing
regional trends and patterns, and offers insights into what has (and has not)
worked in different contexts. An additional chapter focuses on gender, reflecting

the reality that women remain grossly under-represented in politics around
the world, while the increasing influence of money in politics perpetuates this
inequality. While context is a crucial component of any discussion on political
finance, some general recommendations and messages are identified.
An important basis for this work has been International IDEA’s Database on
Political Finance3 which received a major revision and update in 2012. We hope
that this database, which has become the leading and most exhaustive source on
political finance regulation worldwide, will, together with this handbook, provide
tools that will be useful to those actors and stakeholders in a position to undertake
reforms that will address the numerous challenges of money in politics.

Yves Leterme

Secretary General, International IDEA
3

VI

See http://www.idea.int/political-finance

Acknowledgements
he production of this handbook would not have been possible without the
kind support, contributions and expertise of a number of individuals.
First, we would like gratefully to acknowledge the contributions of the authors:
Julie Ballington, Elin Falguera, Muriel Kahane, Juan Fernando Londoño,
Karl-Heinz Nassmacher, Magnus Ohman, Daniela Piccio, Fredrik Sjöberg,
Daniel Smilov, Andreas Ufen and Daniel Zovatto. We also thank Elin
Falguera, Samuel Jones and Magnus Ohman for their overall coordination
and editing of the handbook.
Our sincere thanks to UN Women for contributing the valuable chapter on
‘Women in Politics: Financing for Gender Equality’.
We would also like to thank the following people, who have generously
given their time, ideas and insights during the development of this book:
Adhy Aman, Raul Avila, Elin Bjarnegård, Andrew Bradley, Catalina Uribe
Burcher, Elaine Byrnes, Andrew Ellis, Judith February, Alfonso Ferufino,
Harold Jansen, Barbara Jouan, Norm Kelly, Lisa Klein, Michael Koss, Laura
Sanz Levia, Paul Lewis, Susan Markham, Percy Medina, Graeme Orr, Rafael
Roncagliolo, Delia Ferreira Rubio, Kristen Sample, Victor Shale, Pilar Tello,
Wondwosen Teshome, Dirk Tromsa, Alejandro Urízar, Sandra C. Urquiza,
Jorge Valladares, Sam van der Staak, Vasil Vashchanka and Lotta Westerberg.

hanks also go to International IDEA colleagues Millad Matin, Andrea
Milla and Nadia Handal Zander. We would also like to express our gratitude
to Kelley Friel and Eve Johansson for their highly professional editing of
this book. Finally, we would like to extend our thanks and appreciation to
International IDEA’s Member States.

VII

Contents
Foreword ....................................................................................................................................... III
Preface .......................................................................................................................................... V
Acknowledgements .................................................................................................................... VII
Acronyms and abbreviations .................................................................................................... XVI
Chapter 1: Introduction to Political Finance ........................................................................
Why is political inance important? .............................................................................
Political inance regulations .........................................................................................
Enforcement .....................................................................................................................
Internal party inance behaviour ..................................................................................
About the handbook ........................................................................................................
Introduction to the regional chapters ...................................................................
References ........................................................................................................................
Notes ..................................................................................................................................

1
1
3
4
4
6
8
9
9

Chapter 2: Getting the Political Finance System Right ......................................................
Introduction ......................................................................................................................
The best way to reform political inance regulations ..............................................
Political goals .............................................................................................................
Context .........................................................................................................................
Ways of regulating political inance ............................................................................
Donation bans and limits ..........................................................................................
Public funding .............................................................................................................
Spending bans and limits .........................................................................................
Financial reporting .....................................................................................................
Enforcing political inance regulations .......................................................................
References ........................................................................................................................
Notes ..................................................................................................................................

12
13
13
16
18
21
21
22
26
28
30
33
33

Regional Studies of Political Finance:
Regulatory Frameworks and Political Realities .................................................................

38

Chapter 3: Africa .........................................................................................................................
Introduction to problems in African political inance ..............................................
Access to funds for all relevant actors .................................................................
Abuse of state resources .........................................................................................
Clientelism ...................................................................................................................
Vote buying ..................................................................................................................
Illicit funding ................................................................................................................
Dependency on foreign funds ..................................................................................
The cash nature of African economies .................................................................
An overview of political inance regulations in Africa ............................................
Sources of income for political parties and candidates .........................................
Contribution bans .......................................................................................................
Contribution limits .....................................................................................................
Sources of private income .......................................................................................
Public funding .............................................................................................................
Abuse of state resources .........................................................................................

39
39
39
40
40
40
40
41
41
41
42
42
43
44
49
54

VIII

Spending by political parties and candidates ...........................................................
Spending limits ...........................................................................................................
Actual spending ..........................................................................................................
Vote buying ..................................................................................................................
The relation between political party and candidate spending ........................
Enforcement of political inance regulations ............................................................
Disclosure requirements ..........................................................................................
Scrutiny and enforcement .......................................................................................
Sanctions .....................................................................................................................
The role of civil society and the media ..................................................................
Conclusions .......................................................................................................................
Recommendations ...........................................................................................................
Policy makers ..............................................................................................................
Monitoring and enforcement agencies .................................................................
Ruling parties ..............................................................................................................
Opposition parties .....................................................................................................
Civil society .................................................................................................................
Media actors ...............................................................................................................
International actors ...................................................................................................
References ........................................................................................................................
Notes ..................................................................................................................................

56
56
56
57
58
59
59
60
61
62
62
65
65
65
66
66
66
67
67
67
75

Chapter 4: Asia ............................................................................................................................
Introduction ......................................................................................................................
Problems in Asian political inance .............................................................................
Corruption, clientelism and clans ...........................................................................
Linkages between political parties, voters and business ................................
Ineffective implementation .....................................................................................
Illicit funding ...............................................................................................................
Lack of resources for opposition parties and female candidates ...................
Abuse of state resources .........................................................................................
Vote buying ..................................................................................................................
Regional initiatives to regulate political inance ......................................................
Sources of income for political parties and candidates .........................................
Contribution bans ......................................................................................................
Contribution limits .....................................................................................................
Private sources of income .......................................................................................
Public funding .............................................................................................................
Abuse of state resources .........................................................................................
Political funding and female representation .......................................................
Spending by political parties and candidates ...........................................................
Spending limits ...........................................................................................................
Actual spending .........................................................................................................
Vote buying ..................................................................................................................
Enforcement of political inance regulations ............................................................
Disclosure requirements ..........................................................................................
Scrutiny and enforcement .......................................................................................
Sanctions .....................................................................................................................

82
83
85
85
85
86
87
87
88
88
88
89
89
91
91
96
100
100
101
101
102
103
104
104
105
107

IX

Civil society and the media ......................................................................................
Conclusions .......................................................................................................................
Recommendations ...........................................................................................................
Policy makers ..............................................................................................................
Monitoring and enforcement agencies .................................................................
Ruling parties ..............................................................................................................
Opposition parties .....................................................................................................
Civil society .................................................................................................................
Media actors ...............................................................................................................
International actors ...................................................................................................
References .........................................................................................................................
Notes ...................................................................................................................................

108
109
111
111
112
112
113
113
114
114
115
123

Chapter 5: Latin America ..........................................................................................................
Introduction ......................................................................................................................
Problems of political inance in Latin America .........................................................
Lack of transparency and reliable information ...................................................
Poorly conceptualized regulations ........................................................................
Iniltration of illicit inancing ...................................................................................
Absence of strong monitoring and enforcement agencies ..............................
Sources of income for political parties and candidates .........................................
Contribution bans .......................................................................................................
Private sources of income .......................................................................................
Limits on contributions .............................................................................................
Public inancing ..........................................................................................................
Abuse of government resources ............................................................................
Spending by political parties and candidates ...........................................................
Spending limits ...........................................................................................................
Actual expenditures ...................................................................................................
Vote buying ..................................................................................................................
Compliance with political inance regulations ..........................................................
Transparency ..............................................................................................................
Oversight and compliance .......................................................................................
Sanctions .....................................................................................................................
Conclusions .......................................................................................................................
Recommendations ...........................................................................................................
Policy makers ..............................................................................................................
Monitoring and enforcement agencies..................................................................
Civil society .................................................................................................................
Media actors ................................................................................................................
International actors ...................................................................................................
References .........................................................................................................................
Notes ...................................................................................................................................

128
129
130
130
131
131
132
132
132
134
139
140
145
146
146
146
147
148
148
150
151
151
153
154
155
156
156
157
159
167

Chapter 6: Eastern, Central and South-eastern Europe and Central Asia ....................
Introduction ......................................................................................................................
Regional problems with money in politics ..................................................................
Abuse of state resources .........................................................................................

172
173
174
174

X

State control over the political arena ...................................................................
Private-sector kickbacks and buying government favours ..............................
Illegal and illicit funding ............................................................................................
Dodging rules and avoiding transparency ............................................................
Overview of political inance regulations ..................................................................
Sources of income for political parties and candidates .........................................
Contribution bans ......................................................................................................
Contribution limits ......................................................................................................
Sources of private income ........................................................................................
Illicit funding ...............................................................................................................
Public funding .............................................................................................................
The abuse of state resources .................................................................................
Spending by political parties and candidates ...........................................................
Spending limits ...........................................................................................................
Actual spending .........................................................................................................
Third-party spending ................................................................................................
Enforcement of political inance regulations .............................................................
The role of civil society organizations and the media .............................................
The role of civil society organizations ..................................................................
The role of the media .................................................................................................
Conclusions .......................................................................................................................
Recommendations ...........................................................................................................
Policy makers ..............................................................................................................
Monitoring and enforcement agencies .................................................................
Political parties and politicians ..............................................................................
Civil society and media actors ................................................................................
International actors ...................................................................................................
References ........................................................................................................................
Notes ..................................................................................................................................

174
175
176
176
176
178
178
179
180
182
183
185
187
187
188
189
190
193
193
193
194
195
195
196
196
196
196
197
202

Chapter 7: Northern, Western and Southern Europe ..........................................................
Introduction ......................................................................................................................
Challenges and problems of political inance in Northern,
Western and Southern Europe .....................................................................................
Political corruption ....................................................................................................
Weak enforcement ....................................................................................................
Parties’ state dependency .......................................................................................
Gender inequality .......................................................................................................
Overview of political inance regulations ..................................................................
The growing regulation of political inance .........................................................
Traditions of political inance regulation ..............................................................
Recent trends of political inance reform: toward harmonization? ................
Sources of income of political parties and candidates ...........................................
Private funding of political parties .........................................................................
Public funding of political parties ..........................................................................
Political funding and women’s representation ...................................................
Regulation of spending by political parties and candidates ..................................
Levels and types of spending ..................................................................................

206
207
208
208
209
209
210
210
210
212
212
212
213
220
226
228
230

XI

Reporting, external oversight and enforcement of political
inance regulations ..........................................................................................................
Reporting requirements ...........................................................................................
Monitoring authorities ..............................................................................................
Sanctions for political inance violations .............................................................
The civic watchdogs: civil society and the media ..............................................
Conclusions .......................................................................................................................
Recommendations ...........................................................................................................
Policy makers ..............................................................................................................
Monitoring and enforcement agencies .................................................................
Political parties and politicians ..............................................................................
Media actors ...............................................................................................................
References ........................................................................................................................
Notes ..................................................................................................................................

231
231
233
235
235
236
238
238
239
240
240
241
247

Chapter 8: The Established Anglophone Democracies .....................................................
Introduction ......................................................................................................................
Current challenges of political inance .......................................................................
Unequal access to resources ..................................................................................
‘Free speech’ vs ‘fair elections’ ..............................................................................
Abuse of state resources .........................................................................................
Dependence on corporate and trade union contributions ...............................
Third-party campaigning ..........................................................................................
Overview of political inance regulation ....................................................................
Introduction of relevant regulation ........................................................................
Sources of income for political parties and candidates .........................................
Contribution bans ......................................................................................................
Contribution limits .....................................................................................................
Sources of private funding .......................................................................................
Public funding .............................................................................................................
Spending by political parties and candidates ...........................................................
Spending limits ...........................................................................................................
Actual spending .........................................................................................................
Enforcement of political inance regulation ..............................................................
Monitoring agency .....................................................................................................
Reporting requirements ...........................................................................................
Disclosure requirements ..........................................................................................
Scrutiny and enforcement .......................................................................................
The role of civil society and the media .......................................................................
Conclusions .......................................................................................................................
Common features .......................................................................................................
Issues for further consideration .............................................................................
Recommendations ...........................................................................................................
References ........................................................................................................................
Notes ..................................................................................................................................

254
255
256
256
257
258
259
259
260
260
262
262
263
264
269
273
273
274
277
277
278
278
279
280
281
281
282
284
287
292

XII

Chapter 9: Women in Politics: Financing for Gender Equality .........................................
Introduction ......................................................................................................................
Normative framework on political participation .................................................
Political inance: key issues ..........................................................................................
Systemic barriers ......................................................................................................
Type of campaign .......................................................................................................
Barriers to fundraising ..............................................................................................
Measures to level the ield .......................................................................................
Political inance legislation ...........................................................................................
Legislation targeting the campaign period (gender-neutral) ...........................
Public funding to enforce quota provisions and candidate-nomination
incentives .....................................................................................................................
Non-legislated initiatives ..............................................................................................
Political party initiatives ..........................................................................................
Emily’s List ...................................................................................................................
The WISH List .............................................................................................................
EMILY’s List Australia ...............................................................................................
Civil society and other initiatives .................................................................................
Conclusion .........................................................................................................................
Recommendations ...........................................................................................................
Legislators ...................................................................................................................
Political inance regulatory bodies ........................................................................
Political parties ..........................................................................................................
Media actors ...............................................................................................................
Civil society .................................................................................................................
International actors ...................................................................................................
References ........................................................................................................................
Notes ..................................................................................................................................

316
326
326
328
329
330
330
333
334
334
334
335
335
335
335
336
340

Chapter 10: Conclusions ............................................................................................................
Money and politics: a contextual overview ...............................................................
Global challenges ............................................................................................................
High costs ....................................................................................................................
Lack of grass-roots support ....................................................................................
Illicit funding and criminal sources ........................................................................
Business and politics ................................................................................................
Unequal access to funds ..........................................................................................
Abuse of state resources .........................................................................................
Lack of enforcement .................................................................................................
Self-regulation of parties and politicians .............................................................
Global regulatory trends ................................................................................................
Growing (and more speciic) legislation ...............................................................
Public funding .............................................................................................................
Gender and public funding .......................................................................................
Recommendations ...........................................................................................................
Policy makers ..............................................................................................................
Monitoring and enforcement agencies .................................................................
Political parties and politicians ..............................................................................
Media actors ...............................................................................................................
Civil society .................................................................................................................

344
345
346
346
347
347
348
348
349
349
351
352
352
353
354
355
356
357
359
360
360

300
301
302
303
303
305
307
308
309
310

XIII

International actors ...................................................................................................
Main recommendations .................................................................................................
References ........................................................................................................................
Notes ..................................................................................................................................
Annexes
Annex I:
Annex II:
Annex III:
Annex IV:
Annex V:

Comparative tables ..........................................................................................
Glossary .............................................................................................................
About the authors ............................................................................................
International dollars (I$) .................................................................................
About International IDEA ...............................................................................

361
362
364
364

367
392
396
400
402

Index .............................................................................................................................................. 403
Tables
1.1.
2.1.
2.2.
2.3.
2.4.
3.1.
4.1.
5.1.
7.1.
7.2.
7.3.
7.4.
7.5.
8.1.
8.2.
8.3.
9.1.
9.2.
9.3.
9.4.
9.5.
Figures
2.1.
2.2.
2.3.
2.4.
2.5.

Levels of political inance regulation per country, by region ...........................
The rationale behind different types of donation bans .....................................
The rationale and considerations regarding direct public funding ................
The rationale and considerations regarding spending limits ...........................
The rationale and considerations regarding inancial reporting
requirements ...............................................................................................................
Amounts of direct public funding distributed in ten African countries .........
Subsidies provided to political parties in South Korea in 2012 ........................
Party dependency on public funding in Latin America, by country ................
Membership fees as a percentage of total party income in
Northern, Western and Southern Europe, 1950–90 ..........................................
Reported donations to political parties in Luxembourg, 2009–11 ...................
Reported donations to the Dutch Social Democratic Party, 2010–12 ............
Annual limits on contributions to political parties in Northern, Western
and Southern Europe ................................................................................................
The costs of French presidential elections, 1981–2002 ....................................
Subsidy levels in anglophone democracies .........................................................
Spending limits for parties and candidates (in I$) ..............................................
Campaign spending in US federal elections since 2000 ....................................
Political funding regulations and gender considerations .................................
Gendered impacts of inance legislation ..............................................................
Enforcement of electoral quotas through public funding .................................
Public funding disbursement relative to number of women candidates .......
Legislation targeting gender-equality measures and earmarking ..................

Building blocks for political inance reform ......