This report addresses the issue of foreign donations in accordance with the second term of reference:
The extent of donations and contributions from foreign sources, persons, entities and foreign-owned subsidiaries to political parties, associated entities and other third parties and entities undertaking campaign activities, and the options available to Parliament to regulate these.
This report recommends that foreign donations to political actors be banned. It also recommends banning foreign donations to both political actors who are currently regulated by the AEC under the Commonwealth Electoral Act 1918 (the Act) and those who are not.
Underpinning the deliberations of the Committee on this inquiry is the principle of national sovereignty, that is, only Australians should have the power to influence Australian politics and elections.
It should be of great concern to all Australians that, in the absence of bans on foreign donations, so many voters share the belief that the views and decisions of our political parties could be influenced by donations from foreign sources. These perceptions reflect negatively on the reputation of Australia’s elected representatives and our democracy itself and these perceptions must be addressed through reform.
The Act currently regulates donation and disclosure requirements for three main categories of political actors in Australia - political parties, associated entities and third parties, which are defined in Chapter One of this report. The Act currently does not differentiate between foreign and domestically sourced donations and does not ban foreign donations.
Evidence presented to this inquiry demonstrated that additional political actors have emerged in the Australian political landscape who are incurring increasing amounts of electoral expenditure that currently falls outside of the current scope of The Act. Therefore the funding of this expenditure is unregulated by the Australian Electoral Commission (AEC) and largely invisible to Australians.
Evidence presented to this inquiry also suggested that these unregulated electoral actors are receiving significant funding, in part, from foreign sources that are not currently publically disclosed in AEC Third Party Returns. This evidence, while relevant in terms of any foreign sourced donations, raises issues that go well beyond the scope if this inquiry and will be examined further by the Committee in its broader inquiry into donations and disclosure.
From evidence to this inquiry, it is also clear that technological developments and campaigning techniques have evolved past current AEC provisions, particularly in relation to the categorisation and regulation of all political actors. Consequently, regulation must evolve to apply to all individuals and organisations who engaging in the Australian political system.
The two provisions in the the Act that deal with the transparency of electoral expenditure incurred by third parties are sections 314AEB and 314AEC. Currently, under these sections the regulation of third parties is less than other participants in the electoral process, particularly in relation to the identification and involvement of donors, both domestic and foreign. The fact that donors to many third parties do not currently attract a disclosure obligation also obscures from the elector the source of funds being used by a third party to incur electoral expenditure.
This situation runs counter to the key principle of ‘transparency’ in electoral activity and creates a significant loophole in current legislation for electoral expenditure to be channelled through electorally unregulated third parties, instead of political parties and associated entities who are subject to greater degrees of regulation and transparency.
If this loophole is not addressed in legislation, the likely consequence of a ban on foreign donations that did not cover currently unregulated third parties, would be for foreign (and domestic) actors to channel additional electoral expenditure funding through these unregulated third parties. This has the very real potential to create a United States like Political Action Committee environment in Australia, which would in all likelihood further exacerbate voter distrust in the Australian electoral system.
Therefore, a more effective, but not burdensome, form of regulation must be introduced for third parties to ensure all political actors in Australia are subject to the same foreign donation bans and transparency standards. Importantly, this must not impose unnecessary burdens or restrictions on the majority of non-government organisations and charities that use both domestic and foreign funds to undertake charitable work and policy advocacy in accordance with their deductible gift recipient status.
The challenge for government and the Parliament is how to implement a ban on foreign donations that respects Australia’s constitutional and democratic freedoms and does not create exploitable loopholes. This would be a complex constitutional and technical challenge for lawmakers. The definition of ‘foreign donation’ is a key challenge for lawmakers overseas and will be an equally challenging one here in Australia. A key consideration when crafting this definition is to do so without disenfranchising Australians abroad, dual citizens, and permanent residents.
The four principles outlined in the Executive Summary have guided the Committee’s consideration of recommendations for this report and have been provided to inform consideration on how to ban foreign donations.
While the Committee as a whole was unable to reach consensus on the final report recommendations, I thank all Committee members for their good will, engagement and deep commitment to ensuring Australia has the strongest possible electoral laws that respect the constitutional and democratic rights of all Australians.
On behalf of the Committee, I thank the Committee Secretariat: Julia Agostino, David Monk, Andrew Gaczol, Nick Parsons, Charlotte Corbyn and Katrina Gillogly for their professionalism, advice and support to the Committee.
Lastly, my sincere thanks to Andrew Giles MP, Deputy Chair of the Committee, for his support and engagement and also to the participating Committee members for their significant contributions to, and engagement with, this inquiry.
Senator Linda Reynolds CSC
Chair