Anti-corruption activist Anna Hazare and his associates have largely got their way on the Lokpal issue and have declared that their next target would be reforming political funding and elections. Now, the Election Commission seems to have come to the government?s aid in taking preemptive steps to deny Team Anna the opportunity to stage an encore. Official sources said the EC wants certain mandatory disclosures ? including quoting the permanent account number (PAN) ? for political donations beyond a seemingly low threshold of R20,000.
The EC has written to the income tax department to make it mandatory for all donors to political parties to submit their PAN and address proof for amounts of R20,000 and above. Besides, such payments must be made only through account payee cheques. With the proposed disclosures, the government will be able to track the source of political donations.
The move is aimed at curbing the flow of black money into the political system. Lack of transparency in funding political parties and elections is said to be one key reason behind the unbridled corruption in the country.
However, it still remains an open question as to how far the new rules would check unaccounted money flowing to political parties. Of course, the EC also decreed that the tax department notify a well-codified accounting system to replace the current practice of political parties preparing sketchy accounts. It has also asked the department to withdraw income tax exemption for political parties that fail to file their tax returns regularly.
Under the Income Tax Act, political parties have to maintain records of donors if the amount involved crosses R20,000. However, there is no format for maintaining such records, resulting in collection of incorrect and incomplete data. There is no requirement for donors to provide their identity either, thereby keeping contributions anonymous. As an incentive, donations are tax-exempt, provided the parties disclose funding details and file returns.
Yashwant Sinha, former finance minister and chairman of the parliamentary standing committee on finance supported the EC initiative: ?There cannot be any control over corruption in our country without massive electoral reforms,? he told FE.
Under the proposed system, donors will submit their PAN and address proof to political parties, which must be reported to the I-T department when required. This will help EC and the tax department to trace donors and take action if any wrongdoing is detected.
?Currently, there is no proper accounting system for political parties, which makes it difficult to locate the source and use of donations. The Commission, therefore wants that the income tax department should notify accounting systems to be followed by political parties,? an official source told FE, adding that this would also facilitate proper auditing of their accounts.
The EC has capped the amount of money that can be spent at R40 lakh for candidates for Parliament polls and R16 lakh for Assembly elections. It is, however, common knowledge that in most cases, the amounts are much higher with political parties refraining from filing tax returns.
As per official data, out of 1200 registered parties, around 800 do not file tax returns. ?While national and other major political parties file their I-T returns regularly, many small parties do not do so. So the income tax department has been asked to withdraw exemptions to such parties,? an official said.
The EC has also asked the I-T department to be vigilant on movement of cash during polls, in attempt to prevent parties from buying votes. Assembly elections in five states ? UP, Uttarakhand, Goa, Punjab and Manipur ? are due early next year. Lack of electoral reforms is seen as one of the reasons behind the use of money power in elections.