Approach for Increasing Political Finance Transparency
1. The Concept of Political Financing
Political financing involves the collection of revenues by political parties, mainly for their
functioning and the creation and management of political campaigns. The financing model can
be categorized into two primary types: public and private financing, which refers to funding
from public or private sources. Public financing consists of funds allocated to political parties
from the state budget (if determined by law) and is generally considered less questionable
compared to private financing sources. Private financing comes from private sources.
In recent years, there has been growing concern about political party financing due to citizens'
doubts about the legality of funds used for election campaigns. Ingrid van Biezen, Professor of
Comparative Politics at Leiden University, and the editor of the political science journal Acta
Politica, highlights in her article that major scandals have occurred in several Council of Europe
member states related to political financing (Ingrid van Biezen, „Financing political parties and
election campaigns – guidelines “).
To address these scandals, states have decided to strengthen the transparency of political party
funding. The primary concern is to avoid losing citizens' trust and interest in political processes,
which could lead to decreased participation in elections. One of the most famous scandals is
the leak of documents called the Pandora papers. In which the details of the financing of the
parties in Great Britain were revealed, that is, of the donations that the parties collected from
different persons (“Pandora Papers: Why are donations to political parties often so
controversial? “).
Political campaigns today require significantly more funds than they did a decade or two ago,
primarily due to the rise of social media platforms that play a major role in shaping voters'
political will. To reach a broader audience, especially younger individuals, parties need to
allocate substantial funds for these types of campaigns. This increased financial need exposes
parties to a higher risk of relying on private funding sources, which subsequently raises the risk
of political corruption.
Frequently, media outlets associate certain parties with wealthy individuals and owners of large
companies in many European countries. This association often arises from the protection of
interests that benefit specific companies or groups operating in those countries.
In response to political corruption and financing scandals, the Council of Europe has initiated
actions to further regulate this critical issue. According to the Council of Europe, the rules on
political party financing should include:
• A reasonable balance between public and private funding,
• Fair criteria for distributing state contributions to parties,
• Strict rules regarding private donations and a threshold on parties' expenditure linked to
election campaigns,
• Complete transparency of accounts,
• The establishment of an independent audit authority and meaningful sanctions for parties
and candidates who violate the rules (Ingrid van Biezen, „Financing political parties and
election campaigns – guidelines “,).
2. Public financing of parties/ Financing from the state budget
Public financing represents a model according to which the parties receive funds from the state
budget through subsidies or, according to Magolowondo, Falguer and Matsimba, from nonfinancial resources. That is, when we talk about the financing of parties from public revenues,
we can say that it is about: direct or indirect funds. The financing of political parties from the
state budget represents a precedent, because according to Magolowondo, Falguero and
Matsimba, private associations are financed (Augustine Magolowondo, Elin Falguera, Zefanias
Matsimbe, „Regulating political party financing Some insights from the praxis “).
When we look at all the facts regarding the financing of parties and the desire of parties to be
independent, that is, to strive to be independent of the influence of third parties, we can say that
it is an extremely good decision to finance parties from the state budget, all for the purpose of
preventing political corruption. It is very important that political parties have how they can
finance their work, and more importantly, their political campaigns.
Political campaigns are mostly the reason that increases the need for private financing,
however, if the parties are in a system that provides them with funds from public funds, that
risk will certainly exist, but it will be smaller.
The models that exist in connection with financing from public funds, i.e. the budget, can be
divided into three:
a) Proportionality model
b) Equality model
c) Combined model (Augustine Magolowondo, Elin
Falguera, Zefanias Matsimbe, „Regulating political party
financing Some insights from the praxis).
When we talk about the first model of proportionality, it is specific to this model that the parties
are financed from public revenues in such a way that each party receives as many funds as are
proportional to the number of votes in the previous elections. The proportionality model is used
in several countries, it is quite specific for the countries of the African continent.
The equality model allocates funds to every political party that exists on the state territory,
regardless of how many votes they won in the elections, that is, how many representatives they
have in the parliament.
When we talk about the third model, this model is represented in most countries and represents
a combination of the proportionality model and the equality model.
Historically speaking, the model of financing parties from public revenues was first introduced
back in 1959, when the Federal Republic of Germany made a decision to allocate funds from
the state budget to political parties. However, the legal regulation of this decision was adopted
only in 1967. Since then, many countries both in Europe and the world have regulated this issue
in a way similar to the solution of the Federal Republic of Germany (Ingrid van Biezen,
„Financing political parties and election campaigns – guidelines “).
However, it is important to emphasize the fact that the method of financing also depended on
the political system ruling in those countries. The specificity of states with communist
government is that the parties relied on membership fees paid by their supporters.
The transparency of spending both public and private money is of great importance for
preventing corruption in political parties. When we talk about transparency, we should also
mention the so-called "secret donations" (Ingrid van Biezen, „Financing political parties and
election campaigns – guidelines “). Secret donations in some countries are allowed up to a
certain threshold, and the reason for approving secret donations is the need to protect natural
or legal persons who are afraid of political persecution, because they supported a certain
political option. Of course, this kind of approval is not a big risk, because political parties can
show a part of the donation that is in accordance with the law and keep silent about the whole
part. That is why the state should be very careful when adopting or allowing this type of
financing of political parties.
2.1. Financing of parties in Bosnia and Herzegovina
In Bosnia and Herzegovina, the Law on Financing Political Parties was adopted, which
regulates the manner and conditions of financing political parties. In accordance with this law,
parties are allowed to be financed from both private and public revenues. Political parties are
financed from the budget of the State, entities and districts, as well as from cantons and cities
or municipalities, depending on the place of registration of the political party.
When we talk about private financing, political parties can collect funds from: membership
fees, profits from companies owned by the political party. In this case, companies can be
engaged in expressly cultural or publishing activities. The specificity of such laws is that they
foresee certain thresholds to influence the reduction of the risk of corruption, so this law also
determines the maximum number of contributions that individuals or legal entities can donate
to a political party. Bosnia and Herzegovina also have a combined model of financing political
parties from public revenues (Law on financing political parties of Bosnia and Herzegovina,
Official Gazette of Bosnia and Herzegovina, number 41/16).
When we talk about the transparency of the spending of both public and private revenues,
political parties have the obligation to submit an annual financial report regarding the spending
of funds. The financial report is submitted to the audit commission established by the Central
Election Commission of Bosnia and Herzegovina. According to this law, each party has the
obligation to state in its report all the benefits it has gained from the activities of entities
operating under the political party. Also, after the end of the election campaign, the parties are
obliged to submit a separate financial report regarding income and expenses during the election
campaign. Fines for various offenses related to the financial report and the receipt of income
and the expenditure of expenses reach up to 10,000 Convertible Marks (Law on financing
political parties of Bosnia and Herzegovina, Official Gazette of Bosnia and Herzegovina,
number 41/16).
So, in this law we see that the state has paid a lot of attention to transparency, especially when
we talk about the income and expenses of political parties. The risk of political corruption is
always present. However, the state has the obligation to use its laws to force political parties to
spend their funds transparently. Of course, we cannot say that this can be prevented only with
reports, but appropriate models must be found which, in addition to reports, will increase the
transparency of the spending of money that the parties received from public or private revenues.
3. Private financing of political parties
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When we talk about private financing, we can say that private financing is older than financing
from the state budget. Throughout history, parties functioned and existed exclusively from
donations and membership fees paid by their sympathizers. However, over time it was realized
that private financing is very risky in the context of political corruption.
In this regard, an attempt was made, as it is today, to reduce the risk of political corruption,
which comes mainly through private donations, through laws. So that everything is not so dark
when we talk about private financing, the parties in this case are in a better position compared
to financing from the budget, which in most cases is fixed and does not change.
In cases of private financing, the funds collected by the party depend on its activity on the
ground and primarily the ability to attract as many donors as possible. Also, in cases of private
financing, a special relationship is created between the party and the citizen as a supporter of
that political party. It should certainly be emphasized that private donations are not
confidential, that is, parties do not have a guarantee that the donor will not next time divert his
money to another political party. So, there can be inequality between parties in terms of
fundraising, because one party can raise three times more funds than other parties, which was
the case in Slovakia. In this regard, the parties are in an unequal position, especially when we
talk about the pre-election campaign (Ingrid van Biezen, „Financing political parties and
election campaigns – guidelines “).
When we talk about private financing, the question arises as to whether such donations buy
influence over those parties and whether the voters are deceived in such a situation, that is, that
their will and decision mean nothing. All these are questions to which we have not received
final answers to this day. Through its laws, the state tries to reduce the risk of political
corruption through various mechanisms, but I still don't have the final and most effective
solution.
4. Conclusion
Transparency in the work of political parties is the best principle that will remove any doubt
about the existence of political corruption and restore faith to voters, that their vote will not be
insignificant. All revenues collected through private donations must be justified in detail, and
it is up to political parties to demonstrate their independence and impartiality through their
actions, because this is the only way to remove any doubt.
5. Sources
1. Augustine Magolowondo, Elin Falguera, Zefanias Matsimbe, „Regulating political
party financing Some insights from the praxis“, https://www.idea.int/sites/default/files/publications/regulating-political-party-financing-insights-from-praxis.pdf
2. Ingrid van Biezen, „Financing political parties and election campaigns – guidelines“, https://eos.cartercenter.org/uploads/document_file/path/309/Financing_Political_Parties_en.pdf
3. Law on financing political parties of Bosnia and Herzegovina ("Official Gazette of
Bosnia and Herzegovina", number 41/16)
4. Pandora Papers: Why are donations to political parties often so controversial?https://www.bbc.com/news/uk-politics-58783961
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