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Federal

Feb 2, 2016

Why we're groping in the dark on political donations

The state of our political disclosure regime means that we're only getting part of the picture on who is trying to influence our political parties.

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While there was plenty of data to dig into yesterday from the Australian Electoral Commission’s annual party funding returns for 2014-15, we’re not doing much more than reading the tea leaves on the financial arrangements of the major political parties and their links with donors. As always, we’re only getting a part of the story — and that part requires careful interpretation. Here are the tricks, lurks and loopholes that parties and donors exploit:

The credibility gap between declared income and total income

Declared income is the amount of revenue of political parties for which we know the source: donations, payments, public funding, property or other asset sales, donations in kind — the parties are required to give a total for all amounts received over the reporting threshold ($12,800 in 2014-15). But in most cases — except for Clive Palmer — the amount of declared income falls well short of their total revenue. As Crikey reported yesterday, nearly 40% of the major parties’ income falls into this credibility gap.

The least transparent party is the Liberal Party, which refuses to disclose contributions below the reporting threshold. Less than 60% of Liberal branches’ revenue can be identified, and just 42% of the Liberal National Party’s. Both the federal Liberals and NSW Liberals had a smaller gap than usual in 2014-15 — they are at 76% and 74% respectively. But nearly 95% of federal Labor revenue can be identified — reflecting its willingness to report all donations down to $1000 — and 73% of NSW Labor’s revenue.

For smaller parties and smaller branches of the major parties, the gap is bigger, because they rely more on smaller donations that may even be below the $1000 threshold to which most Labor branches adhere. The Greens overall report less than 30% of identifiable payments; the federal Nationals, 33%; South Australian Labor, 30%, the West Australian Liberals, 24%.

Disclosure rules

The basic rules on disclosure are that parties must report all payments above the reporting threshold and a total revenue figure. But donors only have to report donations — strictly defined — above the threshold; payments for goods or services, whether above or below the threshold, are not required to be disclosed by donors, even if they’re transparently a form of donation, like buying a seat at a fundraising dinner. This means far fewer donors disclose their payments than are listed by the parties — with a consequence that if you donate under the threshold to the Liberals, no one will ever know, and only a search of the parties’ returns will reveal a payment that is above the threshold but not a donation.

So, for example, it’s only by searching the federal Liberal Party’s return that you’ll find the ASX and Coles both paid over $100,000 to the party, but in neither case is it identified as a donation, so neither had to make a return to the AEC. And checking a party’s return document is more laborious for, say, time-pressured journalists than searching the AEC’s user-friendly system under “Donors” — assuming they know that you should check the return as well.

And as the parties shift more and more away from outright donations to good/service-based contributions systems such as fundraising dinners and membership fees for fundraising fora, the number of donors who are reporting their contributions will fall. Consider the 2014-15 federal Labor return, for example: page after page of “Other receipt”, with only a handful of actual donations that are reportable by the donors.

To their credit, a number of companies are taking the approach of disclosing everything, whether reportable or not — a commitment to transparency begun by Macquarie Bank, which has long disclosed every contribution to parties. Aspen Medical, for example, made a series of contributions to Liberal Party branches totalling over $20,000, none of which it was required to report, but it disclosed them anyway. KPMG disclosed both reportable donations and tiddlers like $65 given to the Liberals.

But lobbyists who attend party fundraisers report that many companies they see around them at such events never report their contributions, because they can be justified as payments for goods or services, rather than donations (though under NSW law, as opposed to Commonwealth laws, such contributions have to be reported by donors). Still other donors simply don’t file a return at all. Despite making donations to the Liberal Party totalling nearly a million dollars in 2014-15 — and their being classified by the party as donations — mining magnate Paul Marks doesn’t appear anywhere in the donor returns, nor does one of his companies, Brunswick Property, which provided $600,000 to the Liberals.

And, as usual, foreign donors were less than diligent in their returns: Chau Chak Wing’s HK Kingson Investments failed to make a return despite donating $200,000 to the WA Liberals; mystery property businessman Jiandong Huang gave $100,000 to the federal Liberals without making a return.

Enforcement

Foreign donors need not be too concerned; nor, for that matter, domestic donors. As Bill Shorten demonstrated last year, there is virtually no penalty for non- or extremely late disclosure of donations. Courtesy of the trade union royal commission, Shorten and the Victorian branch of the ALP were caught out having failed to declare a contribution of what was initially thought to be $40,000 but — after Labor’s rushed effort to lodge an amendment — turned out to be over $65,000 in 2006 and 2007.

But Shorten was a rare example of a late or amended return attracting attention. Smart operators know that the media only really focuses on political donations on February 1. Slip an amendment or a late return to the AEC after that date and chances are it won’t get much coverage — although that’s changing: in 2014 the NSW Liberals were spotted quietly amending a return involving a fundraising body for Tony Abbott from four years before.

It’s all part of a rotten system that prevents us from seeing who is funding our political parties, keeping voters in the dark and leaving parties or donors who choose to do the right thing and act transparently at a disadvantage.

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