Political funding: Finance Bill removes cap on corporate donations, disclosure of beneficiaries' name
reema rai 29 Mar 2017

Political funding: Finance Bill removes cap on corporate donations, disclosure of beneficiaries' name

On Tuesday, 21 March, the government made 40 amendments to the Finance Bill, 2017. Some of the major changes include lowering the legal limit on cash transactions from Rs 3 lakh to Rs 2 lakh and making Aadhaar Card mandatory for filing Income Tax Returns (ITR) and for applying for PAN Card. The proposal is set to come into effect on 1 July 2017.

However, the focus of this article is on one particular amendment which will prove to be catastrophic for Indian democracy and corrupt our politics. Finance Minister Arun Jaitley surprised all by adding an amendment to the Companies Act, 2013 (text of the Act can be read here).

This amendment implies two major things:

  1. It removes the cap that barred companies from donating more than 7.5% of their average net profit to a political party.
  2. It removes the requirement that made it mandatory for a company to disclose the name of the party to which the donation has been made.

The cap on corporate donations to political parties was placed for a legitimate reason: to ensure that democracy could not be bought. Eliminating the cap removes the checks put in place to avoid any nexus between the government and the private sector. Eliminating the cap allows corporations to donate to parties freely – and anonymously – and thus gain political favours from select candidates. Above all, removing the cap makes it nearly impossible for independent, new candidates without influential connections or a hefty bank account to succeed in politics – because they will always be out-cashed.

“This means, for example, that an infrastructure firm could theoretically pay up to 50% of its net profits to a single party as donation without anyone getting wiser as to which party has been paid … this throws open the possibility that an order to build a highway or a railway bridge could be given to a firm and that firm could pay the donation to the party in power which placed the order with it … The beauty is that if this happens, it will be legitimate and no questions can be asked by any ethics committee of Parliament or by any CAG audit.” – A senior official with the Comptroller and Auditor General’s office to The Telegraph.

The Finance Bill also seeks to amend the Representation of People’s Act (which governs elections in India) to ensure that electoral bonds are anonymous. Firstly, electoral bonds are like promissory notes; any person can buy these bonds from a notified bank, and then deposit them in an account listed out by a political party. Those buying these bonds to put money into political parties do not have to record who they are.

It is not as if we don’t know the disastrous consequences of unlimited corporate donations to political parties. To realise that the move is both suspicious and harmful, one need only look to another large democracy: the United States. Since the US Supreme Court ruling in favour of unrestricted campaign spending in 2010, American politics has taken a violent downturn – and partisanship is at a historic high.

To understand why the PM Modi government’s move to eliminate the cap on corporate donations to political parties, one needs to understand Citizens United.


India must learn from the US’s mistakes

“[Because of unlimited campaign spending,] you’ll see the disappearance of transparency in government, the corruption of the press, and the diminishment of local control. For capitalism to work, you need democracy to work. And right now [the US doesn’t] have democracy. We have what I would call a corporate kleptocracy, an oligarchy by the corporations and the wealthy.” – Robert F Kennedy Jr, environmental activist & attorney, 10 October 2016, Texas.

The Indian government’s recent amendment, quite like the Citizens United ruling, puts corporate power over individual rights. Eliminating the cap on corporate donations to political parties gives private enterprises unwarranted say in the electoral process and governance. Corporations don’t have free speech, citizens do.

Are we willing to live in a democracy where a small group of super-rich individuals donate endlessly to their choice of candidates enabling them to conquer television airtime and newspaper advertisements and campaign billboards and banners? Allowing their choice of candidates to win elections, thereby cementing their ability to control these candidates even after they win? Are we willing to live in a democracy where this small group of super-rich individuals further their own interests and corporate ambitions at the expense of the rest of the country?

Hopefully not. Because such a system would not be a democracy.

The Modi government needs to rethink the amendment seriously. It is unnecessary, calamitous, and will degrade the health of our democracy, perhaps irreversibly. Since the Citizens United ruling, corporate special interests in America have dominated the political process, the media’s integrity has fallen, and public faith in the government has plummeted. The ruling sharply divided the American people and concentrated the powers of the government and the economy in the hands of a few super-rich people, who grew in clout and wealth at the expense of everybody else.

We should learn from America’s mistakes. The amendment is slated to go into effect on 1 July 2017. The government should reverse its decision for the sake of democratic values.


Source: The Logical Indian

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