MARIAN SAWER. Foreign donations and beyond.

Jun 12, 2018

In the furore over Chinese political donations, the broader electoral reform agenda can easily be forgotten. Australia was once a pioneering democracy but it has fallen behind in protecting its reputation for electoral integrity and political equality.

Regulating foreign donations is part of this agenda – most democracies do it to prevent foreign interests from exercising political influence. Australian political parties are now agreed on it (one exception is Senator Leyonhjelm). Once China rather than the UK became the chief source of foreign donations they became the subject of headlines and public concern, even though they are a very small percentage of overall political donations.

The government addressed this concern through its 2017 Electoral Legislation Amendment Bill restricting political donors to Australian citizens and companies incorporated in Australia. Unfortunately, the Bill is infected by antagonism towards advocacy organisations such as GetUp! in particular and the advocacy role of charities in general. The 2017 Bill requires that when third parties spend more than the disclosure threshold for a ‘political purpose’ any donation greater than $250 must be accompanied by a statutory declaration that it comes from an ‘allowable donor’.  

The Bill has united the third sector in opposition, including organisations close to the government such as the Institute of Public Affairs. One problem is the divergent meanings of ‘political purpose’ in the Electoral Act and in the 2013 Charities Act. 

The Charities Act follows the High Court (in AidWatch) in recognising that relevant issue advocacy is compatible with charitable status as long as it does not take on the political purpose of promoting or opposing particular parties or candidates. The Charities Act specifically exempts the purpose of advancing debate over party policies, including the ranking of those policies, from the political purpose prohibition. 

The Electoral Act definition of political expenditure, however, encompasses all advocacy on issues in an election – a definition expanded in March 2018 to include issues ‘likely’ to be before electors. 

Electoral Act regulation of third parties was extended in 2006, when requirements were introduced for third parties to submit an annual return to the Australian Electoral Commission (AEC) if they incurred ‘political expenditure’ of more than the disclosure threshold (now $13,500). 

Nonetheless, the 2006 requirements did not have the chilling effect foreseen for the 2017 Bill, perhaps because few charities have felt required to submit returns and others may not have known of the requirement.  The non-charitable GetUp! did acknowledge two overseas donations (from Germany and Switzerland) in its 2016–17 political expenditure return. Conservative parties in the Anglosphere have been particularly concerned about political donations from overseas environmental organisations.

In Canada, a Senate Inquiry, ‘Controlling foreign influence in Canadian elections’, examined complaints about provision of money by the US-based Tides Foundation to Canadian environmental organisations registered as third parties in the 2015 election. In Canada no-one who is not a Canadian citizen or resident in Canada is permitted to ‘induce’ voters to vote in a particular way and no corporate donations are allowed. However, third parties are only regulated for the six-month election period and in relation to election advertising.

In April, the Joint Standing Committee on Electoral Matters chaired by Senator Linda Reynolds published an Advisory report on the 2017 Bill, recommending amendments to address the concerns of the charitable sector over the Bill’s potentially chilling effect on issue advocacy. The proposed 15 amendments include sorting out the discrepancies between the Electoral Act and the Charities Act and removing the requirement for statutory declarations.

However, even if such amendments are successfully negotiated and result in a ban on foreign donations in time for the next election, this is only one small part of overdue electoral reform. Broader reforms have been canvassed since at least 2008 at the federal level and are set out persuasively in the Report of the Senate Select Committee into the Political Influence of Donations, tabled on 6 June.

First, is the need for greater transparency in relation to political donations.  This means the introduction of online, real-time disclosure of donations to the AEC, rather than the public having to wait for up to 18 months for donation returns to be published.  The technology for this has long been available but not the political will, at least at the federal level. It has been done in Queensland since February 2017. 

It also means requiring fuller disclosure of private revenue and making the returns more searchable. The AEC gave evidence to the Senate inquiry that of the total receipts of major political parties less than 10 per cent were disclosed as donations.  Items such as fees paid to attend fund-raising events or for membership of business forums are not included and there is ample opportunity for ‘donation splitting’ so that donations fall below the disclosure threshold. 

But transparency is not enough to resolve issues of the role private money has come to play in Australian elections, compared with comparator democracies such as Canada, New Zealand or the UK. In Australia, NSW has led the way in introducing an effective regime of caps on political donations and expenditure, relating to parties, candidates and third parties in the election period. However, until a national approach is adopted, loopholes will remain. 

In the 2015 McCloy case, the High Court emphasised that transparency was not enough to address ‘the mischief of inequality of access based on money’. The court found that donation caps were consistent with the implied freedom of political communication because they were appropriate to the purposes of preventing the actuality or perceptions of corruption and upholding the principle of political equality.   The court said that guaranteeing the ability of the few to make large political donations to secure access to those in power was antithetical to the ‘great underlying principle’ of representative government set out in the Constitution.

Any electoral reform at the federal level to uphold this principle of political equality is unlikely in the near future. As can be seen in the dissenting reports to the Senate Select Committee Report, the Labor Party is committed to increased transparency but has reservations about donation caps, while the Coalition is opposed to both increased transparency measures and to caps. 

The most we can hope for in the short term is the separation of a ban on foreign donations from measures chilling third sector advocacy. That is certainly worthwhile but not enough!

Em.Professor Marian Sawer AO, FASSA
ANU Public Policy Fellow

Editor, International Political Science Review

School of Politics and International Relations
Haydon-Allen Bld #22, Australian National University

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