Budget 2017: Proposal on political reforms flawed on 3 counts

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On Wednesday, Finance Minister Arun Jaitely during his Budget speech proposed to limit cash donations to Rs 2,000. His announcement was hailed by many and according to the finance minister himself, it was one of the biggest political reform in 70 years. However, some have said that the proposal is flawed.

An analysis by the Association for Democratic Reforms said that the budget does not promise scrutiny of income declared by political parties. The analysis says that the proposal to limit cash donations to Rs 2,000 is flawed on three counts.

Union Finance Minister Arun Jaitley during a post-Budget press conference in New Delhi

Accountability: The Budget does not promise scrutiny of income declared by political parties from various sources and the corresponding measures of penalisation, without which the reforms will remain incomplete. Unless scrutiny of accounts of political parties is taken up by a body approved by the Comptroller and Auditor General or the Election Commission, the parties' declared income is unlikely to reflect their true income.

Disclosure: The Budget does not propose that the details of all donors who donate above Rs 2,000 be made available to the Income Tax Department and/or an external body auditing the accounts of political parties. Even if the donors make donations by cheque/DD or electronic transfer, unless their complete information is available for audit scrutiny, the sources of donations below Rs 20,000 to political parties will continue to stay hidden.

Political Will: The political parties were 'entitled to receive donations in cheque or digital mode' even before it was proposed in the Union Budget and hence had the option of accepting donations in only such forms that can traced to a donor.

The third suggestion in the Budget was a proposed amendment to the Reserve Bank of India Act to enable issuance of electoral bonds to be purchased by donors to be redeemed in the account of a registered political party.

While it is has been proposed that these bonds would only be available on issuance of cheques or via digital mode of payments, the government is yet to frame a scheme in this regard. It is hoped that the amendment to the RBI Act and the corresponding scheme of the government would take into account the necessity to abolish anonymous donations and provide details of all donors who opt to donate via electoral bonds.

Lack of political will

The final suggestion was that the political parties will be required to file their return of income within the prescribed time and that only such parties which fulfil the above conditions would enjoy 100 per cent tax exemption. It should be noted that the Proviso to Section 13A of the IT Act, 1961 already provides that if the treasurer of a political party or any other person authorised by that party fails to submit a report under sub-section (3) of Section 29C of the Representation of the People Act, 1951, for a financial year, no tax exemption shall be available for that party for such financial year.

The EC, as part of the transparency guidelines, also specified that political parties are required to file their return of income compulsorily. Thus, as the legal provisions were already in place, re-iterating an already existing rule of law does not add anything new to the proposed electoral reforms.

It is to be noted that the RPA stipulates that for a party to claim tax exemption, the treasurer of the party has to submit a donations report declaring details of donors who contributed above Rs 20,000 but there is no legal provision where political parties are debarred from disclosing details of donors who donated below Rs 20,000. This only shows a lack of political will.

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