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Change of Party Funding Rules Proposed

Political party funding rules, tightened ahead of last year’s parliamentary elections, will be eased by allowing corporate donations to parties, according to draft of amendments to the law on political unions initiated by the Georgian Dream coalition.

The amendment is part of the package of bills, which also includes changes to the election code.

In other proposed amendments the package also envisages:

  • Lowering election threshold for parties to become eligible to state funding;
  • State funding for presidential candidates, who garner at least 10%;
  • Lowing fine for violation of party funding rules;
  • Increasing financial incentives to further encourage parties to enlist more female candidate in their party-lists;
  • Legal entities, including companies, which are now banned from making political donations, will be able to donate maximum of GEL 120,000 (about USD 72,500) annually to political parties. 

    Only companies, registered in Georgia and whose beneficial owners are Georgian citizens, will have the right to make political donations.

    A company, which had more than 15% of its revenues in previous year or in current electoral year received from contracts with the state obtained through “simplified procurements” rule, will also be banned from making political donations.

    Corporate funding was banned as a result of legislative amendments passed by the Parliament in late December, 2011 after billionaire Bidzina Ivanishvili went into politics. Corporate donation, before it was banned, was capped at annual GEL 100,000 from a single company.

    The new bill also offers to remove from the law a provision according to which if a group of individual donors have the same source of income (for example if they are employees of the same company) their aggregate donation to a single party should not exceed GEL 500,000 annually. This regulation was introduced in the law when corporate funding was banned in an attempt to prevent funneling of corporate money to political parties via company employees.

    Donations from individual citizens will remain unchanged at existing GEL 60,000 (about USD 36,300) annually.

    A cap of GEL 1,200 for party membership fee annually from each member will also remain unchanged, according to the new amendments.

    The new bill, however, offers to lower cap on total amount of party’s annual expenses from current 0.2% to 0.1% of country’s GDP for the previous year. This provision, if enforced, would mean that this year a political party can spend no more than GEL 26.13 million.

    The bill envisages lowering of a financial penalty for violation of the party funding rules. Currently if a party receives illegal donation it will carry the fine five-fold of the value of this illegal donation; according to the proposed bill the fine will be two-fold of the amount in question.

    The bill also envisages easing for political parties applying for bank loans. If currently a political party can receive bank loan in an amount of maximum GEL 1 million only after being registered as an election subject with the Central Election Commission, after the new regulations go into force a party can apply for loan in the same amount whenever it wants.

    According to the bill, a party having an annual turnover not exceeding GEL 10,000 will no longer be required to provide financial audit report when submitting annual financial declaration to the State Audit Office; currently the parties with turnover less than GEL 1,000 are exempted from this requirement.

    Financial monitoring service at the State Audit Office (SAO) will remain in charge of monitoring of political finances.

    According to the bill the SAO will have the right to carry out comprehensive financial audit of a political party only once in a year; authorization from the court will be required for SAO to carry out unscheduled audit of a party. Timeframe for adjudication in court of a complaint submitted by SAO against a political party will be increased; but timeframe for deciding on SAO’s motion to impound party’s property will remain 48 hours.
    State Funding for Political Parties

    State funding is available for so called “qualified political parties” – those which have cleared, separately or together with others in an electoral bloc, a 4% threshold in parliamentary elections and a 3% threshold in local self-government elections.

    The bill offers to lower 4% parliamentary election threshold for becoming eligible for state funding to 3%.

    Currently there are fourteen parties, which receive state funding; half of them are eligible to this funding based of their performance in the most recent local elections, held in 2010, as none of them managed to garner 4% of votes in the last year’s parliamentary elections.

    The largest recipients of state funding are six parties within the Georgian Dream coalition and UNM party.

    The package of the proposed amendments was developed within a group, which united representatives from parliamentary and non-parliamentary political parties. Initially a proposal was under consideration within the group to introduce such a scheme which would have increased state funding for UNM and GD and would have given additional state funds to those parties, which failed to garner 4% in the recent parliamentary elections (Christian-Democratic Movement – 2.04%; Labor Party – 1.24%; New Rights – 0.43%; Free Georgia – 0.27%; Movement for Fair Georgia – 0.19%; National-Democratic Party – 0.14% and Kartuli Dasi – 0.11%); but the proposal was eventually rejected by the GD, causing protest of these non-parliamentary parties.

    The amendment to the election code, which is also part of the proposed package, envisages allocating state funding to presidential candidates, who will garner at least 10% of votes in the election to reimburse pre-election campaign expenses in an amount of maximum GEL 1 million about USD 603.600).

    A similar provision of reimbursing campaign expenses in an amount of maximum GEL 1 million was first introduced ahead of the last year’s parliamentary elections and applied to those parties, which cleared 5% threshold in the October, 2012 parliamentary elections. But the existing law obligates recipients of this funding to direct GEL 300,000 out of total reimbursement fund towards covering TV ad expenses. This latter provision will be removed from the law, according to the new bill.

    The draft amendment to the law on political parties envisages more financial incentives to political parties for recruiting women candidates in their party lists. The bill offers to give a party, which becomes eligible to state funding, additional 30%, instead of current 10%, of state funding for having at least three, instead of current two, women among every ten candidates of its party list.

    This post is also available in: ქართული (Georgian) Русский (Russian)


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