The topic of foreign donations is closely linked with the broader issue of political donations. The Committee has taken significant evidence in relation to political donations. However, the focus of this report explicitly addresses foreign donations. This report also flags issues that the Committee will consider further in the main report on the outcomes of the 2016 election.
Donations are a legitimate form of participation in Australia’s political process and the High Court of Australia has ruled that political donations are included in the implied constitutional freedom of political expression.
The topic of political donations evokes strong public reactions in all modern democracies, including Australia. Submitters and witnesses discussed a community perception in Australia that individuals and organisations who make political donations do so to influence public debate, policies and decisions of parties and candidates.
Therefore the challenge for government and the Parliament is how to respect Australia’s constitutional freedoms while removing the influence of foreign donations.
Thus, much of the public concern about political donations appears to stem from a lack of trust in the system and the motives of those donating.
The ability, or perceived ability, of organisations and individuals to buy influence through donations – particularly large donations – results in the perception of an ‘uneven playing field’ where a wealthy few can influence results that affect all Australians.
The Committee considered that the principles of a trusted system for political donations should sufficiently reflect what Australians require to allow them to have more faith in the pillars of Australian democracy. The Committee identified four ‘First Principles’ that would guide future reforms of the Act:
Transparency via visible, timely disclosure of donations and donors;
Clarity about what is required and by whom;
Consistency of regulations so that they capture all participants and support an equitable and level playing field; and
Compliance through enforceable regulations with minimal, practicable compliance burdens.
However, others take the view that not all political donations are acceptable in an Australian political context and that disclosure does not necessarily mitigate the risk of undue influence.
The Committee believes these four first principles should guide any discussion and decision making to do with political donations, both domestic and foreign. Associate Professor Joo-Cheong Tham stated that one of the key first principles is:
… if democracy is government by the people, for the people and of the people, then if may be said that foreigners who are not of the people should not be able to influence the political process – including through political contributions.
With regard to the banning or regulation of foreign donations, the International Institute for Democracy and Electoral Assistance (International IDEA) states in its submission:
The rationale for banning or regulating donations from foreign sources is principally to prevent undue influence by foreign interests in domestic political affairs, or to phrase it differently to protect the principle of self-determination. Foreign donations to political parties also risk diluting the impact of domestic donors. A party that receives a significant amount of its funds from overseas may be less reliant on generating funds at home, thus weakening the ties between it and the citizens it should represent.
The Political Actors
The Committee identified that there is an issue with regard to the existing donation rules potentially being circumvented. Despite the various restrictions on political donations that have been introduced, there are still loopholes available to those who seek to avoid disclosure for both foreign and domestic donations.
In addition to donating directly to political parties, foreign and domestic donors are also able to provide finance through ‘associated entities’ which are organisations with links to a political party, such as unions, think tanks, or dedicated fundraising groups. These entities accept donations and pass them on to their associated party or undertake campaigns in support of the associated party’s campaign.
As well as giving donors another avenue to stay below the current $13,200 cap, they are generally subject to less scrutiny than the parties themselves. Although the AEC does publish details of donations to associated entities, they are not available in a single list — which makes it more difficult to track the flow of money. It is also difficult for Australians to ascertain which party they are associated with.
The issue of third parties also presented itself in evidence to the Committee. Third parties are another avenue for foreign and domestic donors to seek to influence the Australian political system.
Avenues for this to occur include:
A foreign or domestic donor having another individual or organisation make a donation to a candidate, political party, associated entity or other third party without disclosing the original donor’s identity;
A foreign or domestic donor making a donation to a third party organisation which undertakes campaigning without disclosing the donor’s identity; or
A foreign or domestic donor funds an entirely separate organisation, possibly listed as a charitable organisation, which engages in political campaigning without being subject to the same disclosure laws as a political party or associated entity. In some cases, this organisation may have originally been set up by a political party or other third party with this specific purpose.
In its submission to the Committee’s 2011 inquiry into the funding of political parties and election campaigns, the AEC discussed this issue:
… if political parties and candidates are limited in their campaigning through expenditure caps, then it leaves the revised system vulnerable to having campaigns overwhelmed by third parties that are not similarly constrained. This could have the potential to relegate the primary players in an election campaign – political parties and candidates seeking to win seats and possibly form government – to second tier status in terms of the volume and reach of campaigning behind bigger spending third parties. Secondly there is a concern that third parties may be used by the primary players themselves to circumvent the donation and expenditure caps imposed on political parties and candidates.
The AEC also commented that introducing legislation intended to circumvent donation and expenditure caps may not be effective and indeed may even be counter-productive:
A registration scheme for third parties seems to also carry the implication that it will in some way admit only certain participants to an election campaign while weeding out those created to circumvent restrictions placed on other participants or disguise the real identities of those behind a campaign. The experience of the United States of America with Political Action Committees [PACs] and the like is illustrative of how a scheme of caps and bans can become effete when the operations of third parties cannot also be curtailed.
The Committee notes that third parties have increased their election expenditure in recent years. According to the release of disclosure returns, one third party spent more than $10 million in 2015/16.
The Committee notes that any ban on political donations from foreign citizens and entities which does not extend to third parties will be ineffective at restricting foreign donations.
The Committee notes that unlike other nations such as Canada, New Zealand or the United Kingdom, Australia does not limit expenditure or require registration from third parties in election campaigns.
Other political actors
The Committee has received evidence that some campaign activities, or ‘other political actors’ are unregulated and thus outside the AEC’s compliance framework and powers.
‘Other political actors’ are emerging in Australia. In practice, they are third parties not subject to third party returns due to their deductible gift recipient (DGR) status. They do not self-identify their activities as political campaigning and thus operate outside the current disclosure regime. This allows both foreign and domestic donors to contribute funds in support of domestic campaigns with little or no transparency.
A level playing field
The Committee identified the need to ensure that a level playing field exists between all political actors. Many submitters to this inquiry agreed that whatever new guidelines or laws are implemented, they must be applied to all players in a fair, even and impartial manner, as well as being readily implementable.
At a hearing in Canberra on 15 February 2017, Mr Paul Erickson, ALP, made the following comment:
Our view would be that we should have a principles-driven approach that ensures that there is a level playing field. Obviously, political parties, associated entities or other third parties and entities that undertake campaign activities are treated differently by the law, have different interactions with the commission and have different rights and responsibilities. I think what we are grasping at here is that it is not as simple as simply enforcing one rule for all, because not every actor is engaging in the system from the same position, so the rules that apply to them obviously need to be practical and applicable.
Similarly, Mr Tony Nutt, LP, commented:
I think that if you go back to first principles, you have just said it perfectly. We have a democratic political society. There are rules, and rules should be set in such a way as to capture all the participants and to ensure that they meet the obligations that society, through the parliament, imposes on everyone. If we need to revise those rules to capture new players, or new mechanisms or new tactics then we should do so, just to ensure that it is a level playing field. As a matter of principle, the Liberal Party would support a level playing field—as a general principle. Adjustments need to be made so that people who are now aggregating and deploying very significant resources are covered in the same way, or in an appropriate way, as political parties are. I think you encapsulated well the level playing field that captures all the participants with a regime that ensures that things are done correctly.
The Committee heard evidence indicating that particular groups are not operating on a level playing field, but appear to be circumventing the system. This includes some environmental groups that are registered as charitable organisations.
The Minerals Council of Australia (MCA) made specific mention to the fact that a number of environmental groups were actively participating in political campaigning but were still registered as charitable organisations, thus allowing them to avoid declaring the source of their foreign and domestic funding. The MCA stated:
… there is evidence that a number of environmental groups that receive tax concessions are engaging in partisan political advocacy – in defiance of clear regulatory restrictions. Registered environmental organisations are endorsed by the Australian Tax Office to receive tax-deductible gifts and contributions, but only for the principal purpose of protecting the natural environment, or undertaking related education or research. Moreover, registered environmental organisations must not act as a conduit for the donation of money or property to other entities, although they may pay other bodies to undertake natural conservation work.
The MCA is not questioning the right of environment groups to pursue political objectives or to raise money for this purpose. However, these groups should not be exempt from reasonable disclosure obligations that help maintain public confidence in Australia’s political system.
In addition, there is evidence that a number of organisations that receive tax concessions are engaging in activities in defiance of clear regulatory restrictions. The MCA provided some examples:
Greenpeace Australia Pacific, 350.org Australia and the Wilderness Society (Australia) participated in a pre-election rally against Prime Minister Malcolm Turnbull in June 2016, along with the Australian Labor Party, the NSW Greens and GetUp!
The Australian Conservation Foundation hired a truck to drive through Minister Josh Frydenberg’s electorate during the 2016 election campaign, which displayed a banner criticising the minister for refusing to sign the Foundation’s environment pledge.
In October 2016, the Australian Marine Conservation Society attacked the Queensland Labor Government’s dealings with Adani by staging protests at Labor’s state conference.
The Wilderness Society (Queensland) authorised campaign material during the 2015 Queensland state election urging voters to ‘Put the LNP last’.
On 14 August 2015, the Australian Conservation Foundation authorised a one-page advertisement against Minister Hunt. The advertisement included the logos of five other entities that are both registered environmental organisations and registered charities.
Friends of the Earth Australia passed on a donation of $262,000 from Graeme Wood to the political group GetUp!
As explained by the MCA above, the Committee notes that registered environmental organisations are endorsed by the Australian Tax Office (ATO) to receive tax-deductible gifts and contributions, but only for the principal purpose of protecting the natural environment, or undertaking related education or research.
Moreover, registered environmental organisations must not act as a conduit for the donation of money or property to other entities, although they may pay other bodies to undertake natural conservation work.
The World Wildlife Fund (WWF) agrees with this position. Drawing on the work of Transparency International, WWF’s submission states:
‘Associated entities’ (eg entities that are controlled by a political party or that operate solely for the benefit of a political party) and third party donors should be subject to the same disclosure provisions as political parties.
In 2016, the House of Representatives Standing Committee on the Environment looked into the issue of environmental groups being entitled to receive deductible gift recipient (DGR) status during its Inquiry into the Register of Environmental Organisations. The evidence gathered from both that inquiry and this Committee’s inquiry are consistent with respect to environmental organisations and their participation in political campaigning.
The Environment Committee stated in its report:
The Committee heard examples of environmental DGRs campaigning in recent state and federal elections, through activities including doorknocking in marginal seats, lobbying candidates, and distributing scorecards evaluating or ranking the policies of various political parties.
Stakeholders expressed concerns about a lack of guidance on the extent to which political activity is both consistent with the purpose of the Register and a legitimate application of tax-deductible donations, and also about a lack of transparency in relation to the political expenditure of environmental DGRs.
The Committee is of the opinion that political entities, be they parties, associated entities, third parties or other actors should all be subject to the same rules. In particular, third parties that engage in activities in contravention of their DGR status.
The differing standard for different actors provides an avenue for rules to be circumvented as discussed earlier in this chapter.
Practicalities and striking a balance in regulation
Finally, the Committee identified a need to strike an appropriate balance between new regulations and the practicalities of implementation and enforcement. The Committee heard evidence that whatever new regulations are created, they must avoid both unintended consequences and being impractical or burdensome to implement.
For example, Mr Samuel Jones, from International IDEA, acknowledged that regulations must be carefully written. He commented:
As with many regulatory measures, including for political finance, the devil is often in the detail. So a good principle in regulating political finance is, of course, for any regulation to be extremely clear, unambiguous and implementable.
Mr Nutt provided an example of unintended consequences:
America is a perfect example of a nation which has gone through wave after wave of campaign finance reform and where the unintended consequences of a number of the changes have made the system worse. There is a lot of literature in the States, which I will not attempt to go through here, from impeccable sources, demonstrating all the harm that has been done by the unintended consequences of well-intentioned regimes. You cut off donations to parties or you limit those in some way, and then you have Super PACs [Political Action Committees] develop. You make other changes that affect the capacity of parties to manage their own internal affairs and respond properly to the legislative regime, and then you find other mechanisms of basically dark money or money that is largely hidden.
Further, Mr Nutt advocated a measured set of regulations that were not counter-productive. He commented:
It is very important that we do not impose excessive new obligations on the vast majority of donors and other participants in the political system who are not now and will never be captured by foreign prohibitions, and whose rights to participate should not be excessively burdened and their opportunities to contribute inhibited by a huge regime designed to identify and prevent a small number of cases. As always, the compliance needs to be proportionate and needs to be sensible, and a combination of some kind of declaration and AEC compliance would deal with those matters.
The Committee is of the view that whatever regulation is in place, it should ensure not just a level playing field, but should not be so burdensome that it becomes ineffective. In other words, it should be practicable to implement.