Donations: a taxing issue
The question of tax breaks for political party donors was raised a while ago, but it is anything but straightforward
Tax deductions on donations to political parties might encourage businesses to give more money in a tough time for fundraising, says George Mahlangu, the CEO for party funding at the Electoral Commission of SA (IEC).
He mooted the idea during a webinar organised by the ANC’s Progressive Business Forum (PBF), and suggested that MPs could consider this when they decide to finetune party funding laws.
The Political Party Funding Act came into operation on April 1, and the first report containing declarations by parties of donations over R100,000 was published last Thursday.
Some parties claim this level of transparency could have a chilling effect on funders, who might fear being victimised if their political preferences are exposed.
Parties also complain about the level of administration and expertise required by the act, which, among other things, directs parties to audit their accounts regularly.
“When this legislation was drafted, the tax benefit was not considered,” Mahlangu said. “It is something the political parties might want to take up in parliament because business might want to donate to this fund, but because they cannot deduct this donation for tax purposes, they might be discouraged to donate to political parties or the Multiparty Democracy Fund.”
Political parties are not taxpaying entities, which means such a consideration would be possible, he said.
PBF executive manager Sipho did not express an opinion on this during the webinar, but called the new act a “democracyenhancing” law.
No-one mandated to speak for the ANC about funding was available for comment by the time of going to print.
But Valli Moosa, who has been agitating for transparency on party funding even before he became minister of constitutional development in 1994, urges caution.
He says it is too early to make a deep analysis of the implications of the act, or to try to find “medicine” for it.
He says the DA already complained about a lack of funding in 2019, following an underwhelming performance in the general elections, while it is also not the first time that the ANC is in such serious financial difficulties that it is unable to afford staff salaries.
“The Political Party Funding Act has been thought through very carefully over a long period of time. Enormous consultation has happened in SA society with many role-players, including business,” he says.
Moosa says taxpayers’ money is already used to fund political parties through the Represented Political Parties Fund, which allocates money to parties proportionate to their size in legislatures.
Giving tax breaks to donors will distort this allocation, Moosa says.
“I’m not sure whether it would be correct for Mr X to, in effect, withhold his tax and give it to the political party of his choice. That is in effect what would happen.”
Distributing public money through the fiscus is a more transparent way of doing it, he says.
Moosa says SA’s democracy is run by political parties, which need to be subjected to rigorous governance. “This isn’t about catching people who get illegal donations, it’s about ensuring the integrity of our parliament, so that [parties] are not puppets of big corporates, foreign governments or gangsters.”
The idea of tax-deductible donations might fail to find support among political parties too.
DA federal finance chair Dion George says that though there are countries that offer tax breaks for party donations, it needs to be conMbele
sidered carefully.
“We want companies to be able to grow and generate jobs, so we probably should first look at tax incentives for other aspects. I don’t think tax incentives for donations to political parties can enjoy priority right now.”
George says finding donations has become more difficult, as the lockdown has slowed down the economy.
“People will not put money in something that they don’t see value in.”
George says his pitch to potential donors is that investing in a good political party, and in a multiparty democracy, is a good investment in SA. But people want to know that the money is properly accounted for, he adds.
Among other expenses, the DA uses its money for litigation, such as its application for a review of the decision to release Jacob Zuma on medical parole. There are also some less prominent cases. “Some egregious things happen in smaller municipalities. If it goes to court, gets a hearing and an outcome, then you find the next time this happens, you can say: ‘Hold on, the court has ruled on this, you can’t do this,’” he says.
The DA’s funding call echoes what Zuma used to tell businesspeople attending PBF fundraising gala dinners.
At one such a dinner, ahead of the 2011 local government elections, Zuma said an investment in the ANC was an investment in growth, while the opposition was an unknown. “I know if I invest in the ANC, there will be good returns for my business,” he said.
The IEC’s party funding report, which contained declarations only by the DA, the ANC and ActionSA, showed that party donations by donors who gave more than R100,000 amounted to about R30m.
I’m not sure whether it would be correct for Mr X to, in effect, withhold his tax and give it to the political party of his choice
Valli Moosa