Political party funding involving (formally abolished) public contributions and private donations. How does it work? How will it evolve?

1. MONEY FOR POLITICAL
PARTIES, OH DEAR
POLITICAL PARTY FUNDING INVOLVING
(FORMALLY ABOLISHED) PUBLIC
CONTRIBUTIONS AND PRIVATE
DONATIONS: HOW DOES IT WORK AND
HOW WILL IT EVOLVE
September 2016

2. AN INSURANCE POLICY FOR DEMOCRACY
“Any citizen has the right to freely establish parties to contribute to
determining national policies through a democratic process” (Art. 49
Italian Constitution).
“Parliamentary Groups (...) shall be provided with the resources
required to perform their functions” (Art. 13 Rules of Procedure of the
Chamber of Deputies) as well as “a single annual contribution varying
according to the size of the membership of each Group” (Art. 16. Rules
of the Senate).
Publicfundingofpoliticalpartiesisconsideredabastionofdemocracy.
Allocation of State resources to political parties is the mechanism used
to ensure citizens’ right to participate in the politics and government of
their community as well as ensure equal, guaranteed and transparent
rights for all.

3. Collusion and corruption
impact enormously on public
opinion:politicalpartyfunding
is one of the symbols of a
party power and no longer a
tool to defend civil liberties.
Law 13/2014 regarding the
abolition of direct public
funding was approved on 21
February 2014.
Article 1 recites: “election
reimbursements and public
funding allocated for political
activities and considered as
co-funding are abolished”.
2014: A NEW PERSPECTIVE
So?
Starting in 2017 political parties
will have to rely primarily on private
resources (individuals, associations,
businesses) in order to participate
in elections and afterwards finance
their everyday activities. The change
is more than revolutionary, at least
on paper; in fact, abolishing election
reimbursements will not automatically
put an end to public party funding:
more on this further on.

4. THE EARLY DAYS OF PUBLIC FUNDING
1958
Luigi Sturzo proposed a Draft Law establishing public funding for
political parties in an attempt to stem the repeated scandals which,
ever since the foundation of the Republic, had seen numerous political
representatives accused of a less than transparent use of private funds.
He stated: “When income and expenses are surrounded by secrecy
regarding how they were come by and how they were spent, corruption
goes unpunished”.
The proposed legislation was never approved by Parliament.

5. IN 1974 THE CHRISTIAN
DEMOCRAT PARTY SUCCEEDED
This was the first regulation
regarding political funding
in Italy; it applied to both
parliamentary groups and
election activities.
1974
FlaminioPiccoli,aChristianDemocrat
MP, proposed the Draft Law “State
Contributiontopoliticalpartyfunding”.
The so-called Piccoli Law (L. 195/74)
was approved by a large majority in
a mere 16 days.
Only MPs from the Liberal Party
voted against it.

6. FUNDING IS INSUFFICIENT, LET’S INCREASE IT
1981
The amount of party funding was increased considerably (L. 659/81)
but with a caveat: a requirement was introduced whereby parties
had to present an annual financial report regarding income and
expenditure – theoretically useful, but practically useless since the
Law did not include any sort of control.
In addition, parties (and their members) were forbidden to receive
funding from the public administration, public authorities, publicly
participated authorities or semi-public agencies.

7. 1978
The Liberal Party proposed a referendum to repeal the Piccoli Law,
but did not succeed in obtaining the necessary quorum.
1993
Still reeling from the Tangentopoli (i.e. Bribesville) cyclone, the Italians
were asked to once again vote on the Piccoli Law (this time the
referendum was proposed by the Radical Party). The Italians voted
overwhelmingly (90.3%) in favour of abolishing public party funding.
THE FIRST SIGNS OF DISCONTENT

8. BACK TO SQUARE ONE?
1993
A few days after the referendum the Amato government established a
contribution for election expenses: € 0,83 per citizen, even if the latter
was ineligible to vote. The money was to be distributed to the political
parties as reimbursement for expenses incurred.
Thanks to this new system, in 1994 political parties were assigned
the equivalent of € 46,9 million for the national elections, plus € 23,4
million for the European elections held that same year.

9. THE FINAL RE-INTRODUCTION
sheet and a profit and loss
statement, which was then
checked by the Presidency of
the Chamber of Deputies; the
election expense report was
submitted to and controlled
by the Court of Auditors.
In 2012, Law 96/2016
tightened economic control
over the political parties; it
established that only parties
or movements with a statute
were eligible to receive
election reimbursement.
1997
Approval of Law 2/1997 “Regulations
governing voluntary contributions to
political parties or movements”. The
Law allowed citizens to allocate ‘four
per thousand’ of their income tax to
political parties and movements (but
they couldn’t indicate which party!)
That year a transitory regulation
was introduced giving parties a fund
of the equivalent of € 82.633.000,
but just for 1997. The obligation to
provide an annual financial report
was reinforced: each party had to draft
an annual budget, including a balance

10. ESTABLISHING A COMPLEX SYSTEM
1999
Five election expense reimbursement funds (L. 157/1999) were created for:
the Chamber of Deputies
the Senate of the Republic
the European Parliament
Regional Councils
Referendums
The sum reimbursed to the above institutions did not depend on the
expenses actually incurred during the election campaign (as a result all
the parties received more than they spent). However, to be able to use
the funds parties/movements had to obtain at least 1% of valid votes
(against the 3% established under the previous regime). To encourage
gender equality any party receiving reimbursement was obliged to
allocate 5% of the funds to initiatives intended to enhance the inclusion
of women in political life.

11. AND IT’S STILL CALLED REIMBURSEMENT
The paradox of sums assigned
to disbanded parties: that year all
political parties received the funds
of the unfinished legislature and the
legislature that had just begun. That’s
not all: as it stood, the regulation
assigned funds to parties that no
longer existed: the Democratici di
Sinistra (DS), Alleanza Nazionale
(AN) and Forza Italia.
Further revision of the
regulations made election
reimbursement “annual”, in
other words, allocated every
year whether or not there
were elections. In 2006
Law 51/2006 specified that
election reimbursement was
to be assigned for each of the
five years of the legislature,
irrespective of how long it
actuallylasted.Andsothanks
to early elections in 2008
political parties benefited
from a double revenue.

12. to ensure transparency and
control over the statement of
accounts” (L. 96/2012).
The law slashed the total
amount of reimbursement
to political parties by fifty
percent.
A COMPLAINT AND
THE FIRST SIGNS OF BACKTRACKING
In March 2012 the GRECO (GRoups
d’Etats contre la COrruptions/
Group of States Against Corruption)
produced a document regarding
transparent political party funding in
Italy.
The document revealed several
anomalies, starting with numerous
cases of false or incomplete
statements of accounts. That same
year the Monti government
approved the Law “regarding the
reduction of public contributions for
parties, including several measures

13. NO MORE ELECTION REIMBURSEMENTS
On 13 December 2013 Prime Minister Enrico Letta posted a Tweet:
“In April I promised to abolish public funding for political parties
within a year. I confirmed that intention Wednesday”.
Decree-Law dated 28 December 2013, later converted into Law
13/2014, envisages the abolition of direct public funding, in other
words the end of election reimbursements starting in 2017.

14. (NOT SO) RESIDUAL FORMS OF PUBLIC FUNDING
ThenewLawestablishedasystembasedonvoluntarycontributions
and forms of indirect contributions and non-monetary benefits.
In particular, a favourable tax regime and the option for taxpayers to
give ‘two per thousand’ of their own personal income tax (IRE) to
political parties.
Liberal monetary disbursement to political parties triggers a reduction
in the gross income tax of natural or legal persons.

15. POLITICAL PARTIES ENTITLED TO PRIVATE FUNDING
Political parties are entitled to private funding if:
one of their representatives has been elected either to the
Chamber of Deputies, the Senate, the European Parliament, a
Regional Assembly or the Assembly of the Independent Provinces
of Trento and Bolzano;
during that same election parties presented candidates in at least
three constituencies for election to the Chamber of Deputies, or
in at least three Regions for the renewal of the Senate or a regional
Council/independent Province.
Those parties are entitled to share in the annual allocation of ‘two
per thousand’ of the personal income tax if the taxpayer specifically
expresses his assent in his income tax return.

16. OTHER FORMS OF TAX RELIEF
Parliamentary allowance. It is an established practice that Mps
give part of his allowance to their political party; nevertheless, this
contribution can be considered a donation and deducted from
taxes. This is a form of – double - public funding because the
contribution comes from the public purse and triggers tax relief (i.e.,
loss of income into the public coffers in favour of political parties).
VATreducedto4%forexpensesincurredbypartiesandcandidates
during an election campaign: printed material, propaganda, office
rental, rallies, purchase of web publicity.
Reimbursement for so-called self-managed messages, free for
the party and candidate, but paid to the State broadcasting station.

17. THE MISSING LINK: FOUNDATIONS
In the Italian legal system there is no single, systematic regulation
governing funding of political Foundations.
The Law passed in 2004 partially rectified this legislative void by
extending the regulations regarding transparency and public
disclosure of statutes and statement of accounts to all entities
(associations, foundations, etc.) in which the governing bodies, either
completely or in part, are chosen by parties/political movements.

18. TOWARDS NEW SCENARIOS
Some sort of public funding of parties and political life is, generally
speaking, a system adopted by most European countries (except Malta
where there is absolutely no form of State funding), while in the rest of
the world this system is very patchy.
The most consolidated private system used to fund politics is the one
adopted in the United States where the lion’s share of resources
comes from small donations by individual voters, fundraising, etc.,
but also to a lesser degree from businesses and associations. This
proves that in the USA funding one’s own political party is considered
almost a civic duty rather than a way to influence decision-making
processes in order to reap personal benefits.
Is Italy veering towards the American model? Although this trend us
a long way off, private funding of parties and political life is gradually
gaining ground.

19. THE BASIC PROBLEM
We’ve unconsciously absorbed the idea that party funding is a waste
of public money.
But without a cap on contributions by private entities how will we
avoid big contributors from dictating the political agenda?
Perhaps this is what we should think about when we cite the “undue”
influence exerted by economic interests in political choices: a Lobby
register... my foot!

20. Telos Analisi & Strategie
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