The Hindu : National : Mixed response to tax sop for party donations

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Tuesday, Jul 07, 2009
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Mixed response to tax sop for party donations

Special Correspondent

NEW DELHI: The proposal to allow cent per cent tax exemption for donations made to electoral trusts drew instant criticism from Left parties, which feared that this could become the “fountainhead of all political corruption.” It, however, found favour with the Bharatiya Janata Party.

In his budget speech, Union Finance Minister Pranab Mukherjee prefaced this proposal by referring to the desirability of bringing about transparency in the funding of political parties. “With a view to reforming the system of funding of political parties, I propose to provide that donations to electoral trusts shall be allowed a 100 per cent deduction in the computation of the income of the donor.”

For this purpose, the Minister elaborated, electoral trusts would be those that were set up as pass-through vehicles for routing the donations to political parties and approved by the Central Board of Direct Taxes.

The proposal did not specify the profile of the donor; whether it would be individual or corporate.

Communist Party of India (Marxist) leader Sitaram Yechury said his party was opposed to legalising corporate funding of political parties. Demanding a review of the proposal, he said if the corporate sector wanted to strengthen the democratic process, their donations should be parked in a separate fund set up by the government or the Election Commission and used for State-funding of political parties.

CPI leader Gurudas Dasgupta said the proposal would benefit parties like the Congress and the BJP. “When corporates donate to parties, they will expect their interests to be served by them.”

The proposal was, however, one of the few aspects of the budget that was welcomed by the BJP. Party’s deputy leader in the Lok Sabha Sushma Swaraj described it as one of the many steps that were needed for political reform.

Funding political parties has been a contentious issue and periodically there have been demands for following the U.S. and U. K. example, where there is a ban on corporate funding of political parties.

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