Now is the time for reform in electoral bond

Relevance: GS Paper II

Why in News?

The Supreme Court’s recent judgement of scrapping the scheme of electoral bonds presented a great opportunity for opposition parties to make it a serious issue during the ongoing parliamentary election campaign.  

More about the news:

• The issue quickly lost momentum as the details of donors and recipients emerged, revealing that all political parties had benefitted from the scheme. 
• This led to a collective reluctance to delve deeper into the matter, as it risked exposing the quid pro quo arrangements that many parties feared would be revealed.
• Historically, political parties tend to unite when faced with issues that could collectively harm them. 
• The revelations from the electoral bond scheme highlighted the broader issue of political donations often coming with expectations of returns, effectively serving as investments for donors seeking short-term benefits. 
• This systemic issue underscores the need for comprehensive reforms in political funding and party operations to enhance transparency and accountability.

The Need for Transparency and Reforms

The Supreme Court's judgment and public sentiment clearly call for greater transparency in the functioning of political parties and a reduction in the use of unaccounted money. There is a growing public awareness of how political parties function and raise their resources, which presents an opportunity for the government to implement meaningful reforms. The following suggestions aim to address the issues related to the functioning and funding of political parties:

Reforms in Political Party Functioning

1. Recognition as Public Bodies: To ensure transparency, political parties should be recognized as public bodies under the Constitution and brought under the purview of the Right to Information Act.
2. Institutional Regulation: Establish a National Commission for Political Parties, similar to the Election Commission of India (ECI), to regulate all aspects of political parties, leaving the ECI to focus solely on conducting elections.
3. Non-secular nature: No political parties should be registered if their name indicates a non-secular nature.
4. Secular and Democratic Principles: Political parties should be required to operate on secular and democratic principles, with limited tenures for elected office-bearers.
5. Annual Audits: The accounts of political parties should be audited annually, with the results made public.

Funding Reforms

1. Transparency in Donations: Complete transparency about donors and recipients is essential. All donations should be made through banking channels, and details of each transaction should be reported to the National Commission for Political Parties.
2. Tax Incentives and Liabilities: Donations should have no tax liability for political parties, while donors should receive a 100% tax rebate on their contributions. However, cash donations should be heavily taxed to discourage their use.
3. Income Tax Returns: Political parties should be required to file income tax returns, regardless of tax liability.
4. Donation Limits: No donor should be permitted to donate more than 20% of their average net profits over the previous three years to political parties. Donors must also report all their donations to the National Commission for Political Parties.
5. Sector-Specific Norms: Donors from tax-exempt sectors like agriculture should make donations through banking channels, with norms set by the government based on their holdings.
6. Auditing Powers: The National Commission should have the authority to audit the accounts of any political party, if necessary, through the Comptroller and Auditor General (CAG).

Public Consultation and Implementation

The central government should seek public comments on the proposed policy for funding political parties before finalizing it. This would minimize legal challenges and ensure that the policy aligns with public expectations and interests.

Conclusion

Implementing these reforms would enhance the transparency and accountability of political parties, thereby strengthening the democratic process in India. Public support for these measures is crucial, and many enlightened politicians are likely to back these suggestions as they ultimately benefit their parties by gaining public trust.