Analysis of Bill C-24 re: Federal Political
Donations
(March 2003)
Set out below is Democracy Watch's analysis of Bill C-24, which
amends the Canada Elections Act and related laws, changing the federal
political donations system:
1) Disclosure
Strengths:
- Disclosure of donations and expenses is required for riding associations
(s.403.35), leadership races (ss.435.03 435.19, 435.3, 435.31) and
nomination races (s.478.23).
- Disclosure rules require identification of the date a donation is made
(above sections, and s-s.424(2) which covers parties).
Weaknesses:
- Disclosure requirements (and donation limits, see #2 below under weaknesses)
do not cover MP's secret trust funds. While these funds cannot be
used for "political purposes" this rule is impossible to enforce
effectively. These funds could still easily be used for personal
purposes, such as vacations and retirement. Disclosure of all donations
received for any reason should be required.
- Disclosure requirements do not include key identifiers, including employer,
corporate affiliation (i.e. if the donor is a member of a board or executive),
and in the case of a company or organization, parent company. These
identifiers are needed to make it possible to know the true identity of
the donor, and are included in the U.S. disclosure requirements for this
purpose.
- Disclosure is still delayed. For parties, reporting still does
not occur until July following the end of the fiscal year, with the result
that disclosure occurs up to 18 months following receipt of the donation.
For riding associations, it is 5 months after the fiscal year (s-s.403(35)(4)).
For nomination races, disclosure occurs 4 months after the race.
Even for leadership contestants, while disclosure occurs every week during
the last 4 weeks of campaign, there is no ban on donations between the
last disclosure report and the vote , with the result that donors will
not be fully known before the vote.
- Disclosure of significant volunteer labour is not required. For
example, a lobbyist may take unpaid leave to work full time on a campaign
for free. This labour will not be disclosed, even though it may have
a value of tens of thousands of dollars. While this area is difficult
to deal with, it is reasonable to require the disclosure of the identity
and number of volunteer hours served by those in senior campaign positions.
- Disclosure of conditions of loans by financial institutions or others
to parties and candidates is not required. As recommended by the
Chief Electoral Officer, conditions of any loans, including term and interest
rate, should be disclosed, as well as the name and address of any guarantor.
2) Limits on Contributions
Strengths:
- An individual will be allowed to donate a maximum of $10,000 total
to a party and its candidates and riding associations per year (s-s.405(1)(a)),
and an additional $10,000 total to leadership candidates in a particular
leadership contest (s-s.405(1)(c)). This donation limit is indexed
to the consumer price index, so it will increase each year (s.405.1).
- Candidates for election, leadership or nomination will not be able
to self-fund their campaigns beyond the maximum limits set out in the bill
(s-s.404.2(1)).
- Only candidates and parties will be able to receive donations during
the election period. Riding associations will be prohibited from
receiving donations.
Weaknesses:
- The $10,000 limit is much higher than what is affordable for the average
Canadian, as $10,000 is about 17% of the average household's annual income.
It is more than triple the limit in Quebec and Manitoba, which both have
a $3,000 limit.
- There are no limits on donations to MP trust funds (See details under
Disclosure weaknesses, above).
- There are no limits on significant volunteer labour for parties and
candidates (See details under Disclosure weaknesses, above).
3) Corporate, Union and Organizational Donations
Strengths:
- Donations by corporations, unions and other organizations to parties
and candidates for leadership races will be banned (i.e. only individuals
may donate) (s-s.404(1)). For candidates in an election or nomination race,
and riding associations, there will be a limit of $1,000 total on donations
from these entities (s-s.404.1(1)).
- There is an anti-avoidance rule that bans making a donation through
another entity or person (such as a corporation trying to give through
its subsidiaries or executives).
- Crown corporations and corporations to which the federal government
contributes more than 50% of the funding will be banned from making political
contributions (s-s.404.1(3)).
Weaknesses:
- The corporate/union donation ban has a loophole that does not exist
in the Québec and Manitoba statutes, in that it allows donations
of up to $1,000 to candidates, riding associations, and nomination race
candidates. Corporations could also give through multiple shell companies
they create (the anti-avoidance rule would be difficult to enforce in such
a case, as each corporation would have a separate legal personality).
- Because a donor's "employer" will not have to be disclosed,
it will be difficult to track whether corporations and unions are funnelling
donations through their employees.
- The corporate/union donation ban will not apply to MP's secret trust
funds.
4) Limits on Expenses
Strengths:
- Expense limits will apply to nomination races at a level that is 50%
of the riding association's expense limit is for a general election (s.478.14).
- Polling and research costs will be included in the definition of election
expenses.
- Riding associations will be prohibited from incurring expenses during
the election.
Weaknesses:
- There will be no expense limits placed on leadership races, the winners
of which are in positions far more powerful than those who win nomination
races.
- The nomination race expense limit is too high, and should be reduced
to 25% of the riding limit.
- Party expense limits will be increased by 13% (s.422(1)(a)), and as
a result a party running a full slate of candidates will be able to spend
roughly $14 million.
5) Public Financing
Public financing is provided through three mechanisms:
i. Expense Reimbursement (s-s.435(1)): Currently, parties are
reimbursed for 22.5% of their election expenses, while candidates are reimbursed
for 50%. Bill C-24 increases the party reimbursement to the candidate level
of 50%. According to W.T. Stanbury, this would have been an added expense
to taxpayers of nearly $10 million in the 2000 election. The percentage
of votes in a riding that a candidate must receive to qualify for the reimbursement
would be lowered to 10% from 15% under the bill (s-s.469(a)).
Analysis: While the expense reimbursement is not highly objectionable,
it does reward spending, giving an advantage to those who spend the most
in an election.
ii. Tax Credit (s.73 of Bill C-24, s.127 of Income Tax Act)
Bill C-24 increases the tax credit provisions. Donors will now receive
75% of the first $400 of their donation as a tax credit (up from $200).
Each of the other tax credit brackets will be increased, so that the maximum
tax credit would be $650 for a political donation of $1,275 or more.
Analysis: The benefit of the tax credit, namely that it is designed
to reward smaller donations, is theoretical. The Lortie Commission found
that only a minority of those eligible for the tax credit end up claiming
it. Thus, in theory, this measure could add approximately $15 million in
taxpayer subsidies to the parties in a non-election year, and approximately
$40 million in an election year, but these estimates will only be accurate
if all those eligible for the tax credit claim it.
iii. Annual Allowance (s.435.01): Bill C-24 contains a
new measure that will provide an annual subsidy of $1.50 per vote received
by the party in the previous general election, as long as the party received
either 2% of the votes cast nationally or 5% of votes in the ridings where
they ran candidates.
Analysis: While basing a portion of the public financing on the
popular vote is democratic, $1.50 per vote is excessive. Taking the results
of the 2000 federal election as a benchmark (and it should be kept in mind
that this election witnessed the lowest voter turnout in recent history,
so the numbers could easily be higher in future elections), this measure
will create a public subsidy of more than $20 million to the parties each
year.
General Analysis of Public Financing: While it is difficult to
determine the value of the added subsidies, taken together it is safe to
say the new measures will provide an increase of roughly $35 million a
year in public subsidies to the parties. As a result, parties will be far
better off financially under the new system than they currently are, even
without corporate and high-end donations. As a result, there will be little
incentive for the parties to broaden the base of their support. The
public subsidies should be decreased to require the parties to broaden
their base individual donors. At the same time, free radio and TV
broadcast time for parties during elections should be increased, as this
is one of parties' highest election expenses.
FOR MORE INFORMATION, CONTACT:
Aaron Freeman, Board member of Democracy Watch
Tel: (613) 241-5179
dwatch@web.net
Democracy Watch's Money in Politics Campaign