Fact check: Is Victoria set to legislate the strictest political donation laws in the country?

Updated

The claim

Victoria's laws for disclosing political donations have long been criticised as among the weakest in the nation, prompting concern that influence could be up for sale.

Under existing rules, political parties vying for power in Victoria need only comply with federal laws, currently requiring the annual disclosure of donations worth more than $13,500.

However, the state's Labor government has promised a sweeping overhaul which, according to Premier Daniel Andrews, would "put an end to individuals and corporations attempting to buy influence in Victorian politics".

He said the changes, which are likely to come into force ahead of the November 2018 state election, would make Victoria's political donation laws the toughest in Australia.

"These will be the strictest donation laws in the country, because Victorians deserve to know who donates, how much, and when," Mr Andrews said in a media statement.

Is Victoria set to legislate the strictest donation laws in the nation? RMIT ABC Fact Check takes a look.



The verdict

Mr Andrews' claim is a fair call.

To test the Premier's proposition, Fact Check identified six criteria to compare the relative "strictness" of donation laws across nine jurisdictions.



Assuming the new rules pass the Victorian Parliament, the state will have the lowest cap on political donations in the nation.

It will also have the equal lowest disclosure threshold for donations and among the most transparent reporting requirements, while also casting its net widely to include third party political campaigners.

Furthermore, penalties for breaches will be equal to the toughest in the country.

Even so, the new rules are far from perfect. While foreign donations will be banned in Victoria (as they are in NSW and Queensland), Victoria won't be banning donations from property developers, or from tobacco, liquor and gambling businesses, as NSW has done.

Because of Victoria's failure to match NSW's list of banned donors, one expert out of four contacted by Fact Check argued that Mr Andrews' proposed laws do not go far enough to qualify as the "strictest".

However, Fact Check concluded that, on balance, the claim is a fair call. This is primarily because Victoria's proposed cap on donations — at $4000 per four-year term (that is, an average of $1000 a year) — is far lower than the cap imposed in NSW; in essence, removing formal political donations as a means of exerting influence over government.

The proposed overhaul

Mr Andrews claims the new laws will "eliminate large . . . donations" to political parties, their associated entities and third-party campaigners.

"We'll give Victorians confidence that governments are making decisions on their merits, not repaying favours to big political donors," Mr Andrews said.

Provided the legislation passes State Parliament intact, the new rules will:

Limit donations to political parties, associated entities and third party campaigners to $4000 over a four-year parliamentary term;

Require the disclosure of every donation of more than $1000 per financial year, down from the current $13,500;

Ban donations from foreign sources; and,

Require the Victorian Electoral Commission to publish "online in real-time" every reportable donation.

Breaches — either by parties or donors — will be punished with "very substantial penalties", according to Mr Andrews, including fines of up to $44,000 and up to two years' jail, as well as the forfeiture of public funding for recipients equal to twice the value of the non-compliant donation.

Mr Andrews also flagged an increase in taxpayer funds for political parties to offset the expected loss of revenue, using a new formula to "be determined over coming months".

The Victorian Electoral Commission will also get more money to implement and enforce the new rules.

Unions, fund-raising entities linked to particular parties (such as the Liberal-linked Cormack Foundation or Labor's Progressive Business), business lobby groups and activist organisations involved in campaigning (such as the left-leaning GetUp!) will all be covered by the new laws, although they will be free to continue spending whatever they like running their own campaigns.

Just how this will be achieved remains unclear, and the devil will most definitely be in the legislative detail.

Nevertheless, the proposed changes would appear to represent a significant re-think of the state's donation laws, with greater transparency and a dramatic cut in the amount that can be donated to politicians and political parties, as well as political campaigners.

However …

Several types of payments will not be included. As Mr Andrews made clear in his news conference, so-called "membership fees" paid to political parties will not be covered by the revamp. These include "affiliation fees" paid by various unions to the ALP.

These payments, which are said to represent an "aggregate" of membership fees paid by individual union members, are a vital funding source for Labor. They also provide unions with voting rights at various Labor Party decision-making forums such as state conferences and preselection ballots.

Membership fees are not separated out in disclosures made to the Australian Electoral Commission, so it is difficult to gauge accurately how much they contribute to ALP coffers. Instead, they are counted by the Electoral Commission in a broad category referred to as "other receipts".

For example, in 2015-16 (the latest available full-year figures), the Shop Distributive & Allied Employees' Association (Victoria Branch) handed over $244,871 in "other receipts" to the ALP, while the state branch of the CFMEU's Construction & General Division chipped in $166,863.

Soon-to-be published research by governance expert Dr Lindy Edwards, of the University of NSW, shows that declared "donations" account for a relatively meagre 12 per cent of Labor Party income and 15 per cent of Liberal Party income, while undisclosed funding makes up half of Labor Party income and almost two-thirds (63 per cent) of Liberal Party income.

During his news conference, Mr Andrews suggested it would be unconstitutional to "limit" membership and affiliation payments from unions and other entities.

In making this argument, he referred to a 2012 attempt by the former NSW O'Farrell Liberal government to ban union affiliation fees by restricting party donations to individual donors.

In a unanimous decision, the High Court ruled that prohibiting an associate or corporation from making a political donation breached the implied freedom of political communication contained in the constitution.

"Membership subscriptions — so, the fee to join a political party — they are exempt from these arrangements," Mr Andrews said.

"The High Court action in relation to NSW . . . it was found that trying to limit those types of payments was not something that could be constitutionally done, was not safe."

In making his claim, Mr Andrews referred specifically to Victoria having the "strictest donation laws".

Consequently, in assessing the claim, Fact Check has not formally focussed on "other" sources of revenue for political parties, important though these sources of revenue may be.

Nor has Fact Check made a judgment about the potential for perverse consequences, including whether the donations cap might encourage third-party campaigners to conduct their own political campaigns (ostensibly on behalf of political parties).

There are also questions surrounding the Victorian Government's claim that donations will be disclosed in "real time".

During the news conference, Victoria's Special Minister of State, Gavin Jennings, said he expected reportable donations to be listed on the Victorian Electoral Commission's website within "two or three weeks" of the donation having been made.

Queensland is the other state with so-called real time disclosure, but it requires this to be done much more quickly — within one week of a donation being made.

The existing rules in Victoria

Currently, the only limit on political donations in Victoria under the state's Electoral Act of 2002 is that gambling and casino licence holders are not allowed to hand over more than $50,000 a year.

There is, however, nothing to stop associated entities of these industries from making unlimited donations.

Otherwise, as with other states, political parties in Victoria are bound by the Commonwealth Electoral Act 1918, often criticised as inadequate, antiquated, opaque and out of step with international best practice.

How does the Commonwealth deal with donations?

Under the federal act, there are no restrictions on who is allowed to donate or how much, although any donation worth more than the indexed threshold (currently $13,500) must be disclosed annually.

Entities are also free to make multiple donations on different days without declaration, so long as the threshold for those individual donations is not breached.

Therefore, it would be quite possible for a donor to make several donations of $13,499 over a number of days without having to make the gifts public.

Furthermore, it is often many months before reportable donations are made public.

For example, Prime Minister Malcolm Turnbull's record $1.75 million donation to the Liberal Party on the eve of the 2016 federal election is not due to be officially made public by the Australian Electoral Commission until February 2018, some 20 months after it was handed over (Mr Turnbull confirmed the donation earlier this year).

Also, the information that is provided to the Electoral Commission by donors can be difficult to interpret, inconsistent and incomplete.

As governance expert Dr Edwards points out, parties are requested — but not legally required — to distinguish between 'donations' and 'other receipts', and errors and inconsistencies are common.

"They are not required to aggregate payments made to different branches of the party or, in fact, to aggregate payments made to the same branch on different days. Donors are required to lodge a return if the aggregate value of their payment is over the indexed threshold … though they are not required to disclose payments classified as 'other receipts' or made to affiliate organisations."

How would Victoria compare?

Fact Check has created six categories to measure Victoria's proposed laws against other jurisdictions.

These are: caps or limits; disclosure thresholds; existing bans on types of donations; reporting requirements; treatment of third party campaigners; and penalties for breaches.

As can be seen from the table (below), Victoria would, under the changes, have the lowest cap on donations in the nation. NSW is the only other state to cap donations.

Victoria's proposed disclosure threshold, at $1000, equals levels set in NSW, Queensland and the ACT.

In the NT, the level at which a donation must be disclosed is just $200 for donations to individual candidates.

Victoria's proposed ban on foreign donations would match those of NSW and Queensland.

However, NSW is tougher on local donors, banning donations from key industries that have been a particular focus of concerns that political donations can be used to influence decision making.

Victoria would also have among the strictest reporting requirements as a consequence of the proposed revamp, with the introduction of so-called "real time" reporting of donations.

However, as previously noted, it would likely take two to three weeks before donations are disclosed publicly.

As is the case for most other states, but not for the Commonwealth, the activities of third party campaigners such as GetUp! and various business lobby groups would come under closer scrutiny in Victoria, which (along with NSW) would have the equal toughest penalties for breaches.

What the experts say

Dr Yee-Fui Ng, an expert on political donations with RMIT's Graduate School of Business and Law, said Victoria would certainly have one of the strictest donations and disclosure law regimes under the proposed changes.

"The other jurisdiction that is comparable in strictness is NSW, which also has a low disclosure threshold and caps on donations, but also bans on donations from property developers, and the tobacco, liquor and gambling industries," Dr Ng said.

"But NSW does not have real-time disclosure of donations."

Graeme Orr, a Professor of Law at the University of Queensland and an expert on electoral law, said Mr Andrews claim was fair.

"NSW has a cap on political donations, but at a considerably higher level than the Victorian proposal," Professor Orr said.

"So 'strictest' here means the stricter of two that try to restrict private donations, with the other seven not capping donations."

But Professor Orr said it would not be true to say that Victoria would have the most "comprehensive" scheme if you were also to take into account campaign spending.

Unlike NSW, South Australia, the ACT and the Tasmanian upper house, Victoria does not propose applying a cap to election campaign spending.

Professor Orr also cast doubt on Mr Andrews' suggestion that limiting affiliation fees could be unconstitutional.

While an outright ban could be unconstitutional, a reasonable cap would be acceptable, he suggested.

"A reasonable cap on affiliation fees would be constitutional," he said.

"Indeed, you may need such a cap: otherwise, what is to stop a party having a 'business membership' fee set at, say, $10,000 per annum?"

Ken Coghill, an Associate Professor of Management at Monash University, said in areas where exact comparisons were possible it was likely that the Victorian model would be "equally as tough" as some of the NSW and Queensland provisions.

But Professor Coghill, who was the Labor speaker in the Victorian parliament between 1988 and 1992, said he would also like to see a cap on affiliation and membership fees.

"I think the really important thing is that the political parties that have such fees … then that should be disclosed in their financial reporting," Professor Coghill said.

Professor Colleen Lewis, co-director of the Parliamentary Studies Unit at Monash University, said she did not believe Mr Andrew's claim was sustainable, primarily because NSW was tougher with its list of banned donors.

"If you compare banned donors in NSW and Victoria, you can argue that NSW is tougher," Professor Lewis said.

She also questioned Mr Andrews' claim that donations would be disclosed in "real time", given the Government's indication this would, in reality, take two to three weeks.

"This is not real time," Professor Lewis said.

"The technology is there to reveal the amount donated and name of donor within 24 to 48 hours; this has been the case in New York for many years.

"If you allow two to three weeks between receipt of monies and disclosure, very large sums of money could be donated to a political party and not made public before people cast their vote. This means the electorate is forced to make an uninformed vote."

Sources

Topics: political-parties, corruption, alp, vic

First posted