Of course, public funding does not need to be directly proportional to vote counts. The current formula favours incumbent parties that are already dominant. Another possible approach is to provide every party that surpasses a given threshold with the same flat amount, enough to cover minimal operational expenses. Alternatively, a regressive formula could be used that gives less funding per vote to the largest parties – but still a higher overall sum.

Not all public financing of political parties is in the form of direct cash payments, however. All parties fielding candidates in an election are eligible for indirect support in the form of free airtime on television, free ad space on billboards, and free access to public space to hold rallies.

At the July 10 meeting between OSCE/ODIHR and Armenia’s Parliamentary Working Group on Electoral Reform mentioned at the beginning of this article, Dr. Marcin Walecki suggested that Armenia’s current level of public funding for political parties needed to be increased. He acknowledged that allocating tax dollars to parties is a hard political sell but he likened money in politics to a glass of drinking water. First, it should be transparent; anyone should be able to see what’s in the glass. Second, half the glass should come from a dependable source, i.e. the state budget, so that no one gets desperate due to thirst. Third, a regulator needs to actively guarantee quality control, ensuring that the water is clean. And, finally, you should not overfill the glass.

Tax-Deductible Donations

Contrary to many other democracies, donations made to political parties in Armenia are not currently tax-deductible. Instead of straight, budget-to-party funding, the government can provide a tax deduction to citizens that make a donation to a political party. Proponents of this approach argue that it keeps politicians accountable to those they represent by forcing them to reach out and actively make a pitch that attracts voluntary contributions, instead of falling out-of-touch in an ivory tower in the capital.

In Canada, an individual that makes a $400 (CAD) donation to a federal political party will receive $300 (75 percent) back on their tax return. Whether this approach is well-suited for Armenia remains to be seen. Salaried workers do not currently need to file annual tax returns. Even cash-based sole proprietors, like taxi drivers and fruit-sellers, who should be filing tax forms, rarely do so and are rarely pursued. Implementing the system would therefore require building out a new expensive level of administration to process the requests. On the other hand, a similar tax refund scheme for purchasing newly-built apartments has proven very popular, rewarding workers in the formal economy.

A similar approach with less administrative burden involves paying the state’s contribution directly to the political party. Sometimes referred to as a “matching” or “bonus” system, the state would top up every donation that a party receives. That is, if a voter donated 1000 AMD to XYZ Party, the state would contribute an additional 1000 AMD (or 200 AMD, or 2000 AMD, or any other predetermined percentage written into law) to the party as well. One weakness of this model is that it can make vote-buying schemes - a problem that has plagued Armenia in the past - profitable for political parties that also want to launder dark money. Given a 1:1 matching system, a party representative could give a voter 15,000 AMD in cash and ask them to make a 10,000 AMD donation to the party, to which the state would match an additional 10,000 AMD. Both the voter and the party would be ahead by 5000 AMD each, at the taxpayer’s expense, and the original 15,000 AMD from a likely impermissible origin would be successfully deposited in the party’s account.

While the same scheme is technically possible if the state reimburses the donor (the tax-deductible model) instead of paying the bonus to the party directly, that slight difference involves the donor being out-of-pocket in the short term until the tax deduction paperwork is complete, which is a harder sell for a shady character looking for accomplices.

Need for Effective Oversight

Drawing from the OSCE/ODIHR election monitoring report on the 2018 parliamentary election, the Yerevan office of the International Foundation for Electoral Systems (IFES) made a number of recommendations surrounding the Oversight and Audit Service (OAS) of the Central Election Commission (CEC). The OAS has a staff of three people. During the 2018 election, they were joined by four additional auditors seconded by political parties, looking out for their specific party’s interest. IFES recommends expanding its organizational capacity and legal jurisdiction in order to carry out its mandate more effectively.

Third Party Advertising

Armenia is not the only country grappling with the implications of money in politics. Citizens United v. Federal Election Commission was a landmark 2010 supreme court case in the United States, which opened the door for corporations to spend unlimited amounts of money on election-related messaging and advertising. Previous restrictions were struck down as violations of corporations’ freedom of speech. A parallel case in Canada, Harper v. Canada (Attorney General), came to the exact opposite conclusion in 2004: The Supreme Court of Canada ruled that excessive expenditures on political messaging would “bury” the speech of others, and upheld spending caps as a way to maintain “a level playing field.”

Both those cases were related to third-party advertising, not expenditures by the political parties themselves. The prevalence of election spending by entities other than those fielding candidates arose as a way to circumvent limitations on political financing such as spending caps, donation caps, and mandatory disclosure. That lesson is important to keep in mind as the Armenian Parliament targets political finance as the first step in its electoral reform legislative package.

Arm’s-length organizations, affiliated with political parties but organizationally distinct, are already gaining prevalence in Armenia. Some parties have a separate election monitoring organization that allows them to place additional bodies in a polling location. The Gagik Tsarukyan Charity Foundation has been accused of aligning its charitable projects with the political interests of its founder’s Prosperous Armenia Party. The Civil Contract Party chose to stand for election in 2018 under the “My Step” banner, echoing the movement Pashinyan started with his march from Gyumri to Yerevan earlier that year, after which a charity started by Nikol Pashinyan’s wife is also named.

Then, there are producers of political merchandising, which may not be affiliated with a party at all but are pursuing a profit motive. Examples at Yerevan’s Vernissage market include the black “dukhov” baseball cap or wood carvings of the ARF coat of arms. Enforcing copyright on recognizable political symbols could both ensure that parties get a share of these revenues and that they show up in public financial filings.

In the Internet age, however, the hardest third parties to tackle are those beyond the country’s borders. Facebook and Google could significantly impact an election by suppressing the content of one party and promoting another, if they chose to do so. As American companies, they are subject to American laws but, without a physical presence in Armenia, they could decide not to engage with Armenian regulators at all. (Note that this is a hypothetical scenario. Armenia does not have a fairness doctrine in place for online or print media anyway.) The companies don’t even need to be actively involved. Foreigners could spend millions on Facebook ads, targeting Armenian voters, without ever entering the jurisdiction of Armenian governmental regulators. The mental exercise suggests that ideas on how to address media concentration may need to be added to the political financing discussion.

Extensive study will be required as part of a thorough review of political finance in Armenia. Fortunately, with high profile municipal elections scheduled for Gyumri and Vanadzor in 2021, new regulations resulting from the process will get an important test run ahead of the next parliamentary election in 2023.

Harout Manougian is a volunteer legislative assistant to MP Hamazasp Danielyan, who heads the Parliamentary Working Group on Electoral Reform. Opinions expressed are his own and do not necessarily reflect those of MP Danielyan or the working group.