Where do parliamentary parties get funds to fill their budgets

Before the 2019 election, most of the political forces accumulate their financial and human resources, replenish their cash from available sources, and prepare for a low start to storm the 9th convocation of the parliament. According to the Eidos Center, which is an executor of the EU project on informing citizens about political parties’ financing, the state currently provides over 98% of parliamentary parties’ funds. Find out which parties are funded by taxpayers.

2016 became a turning point for all parties that were fortunate enough to fall into parliament after the Revolution of Dignity: due to the introduction of state funding of political forces, they began to replenish their cash from the budget of the country.

Already after the first “subsidy” quarters, it became clear that Ukrainian politicians would move in the European way, that is, the number of revenues on party accounts by individuals and legal entities would be reduced, whereas practically all activities would be supported by finances of taxpayers. On the one hand, it seems that the trend is not very positive, but it should be taken into consideration that it is natural; this practice exists in most European countries that have introduced a similar funding mechanism. That is why the legislator often has to think up and introduce at the level of legislation the so-called “incentives” for the parties to cooperate more closely with the public and encourage them to maintain political force not only through the electoral voice but also from their own pockets.

In 2017, the tendency to reduce the amount of contributions from citizens and legal entities (in fact, unlike most European countries, we have allowed contributions from LLCs and other legal entities) in favour of political parties preserved. So, during the last year, the statutory activities of all political parties receiving state funding (let us remind: currently, it is the Petro Poroshenko Bloc, Radical Party of Oleh Lyashko, Batkivshchyna, Self Reliance, Opposition Bloc and People’s Front) were provided with UAH 442.3 million, where the most of this sum was received by the People’s Front (113.7 million), Petro Poroshenko Bloc (112.1 million) and Self Reliance (100.6 million).

A similar situation also occurs in the first half of 2018: although formally all the parties have attracted UAH 24.4 million from private sources, 23.3 million of which are the funds of the Batkivshchyna party, which is abnormally high but expected: political force is implementing a large-scale campaign of the New Course of Tymoshenko, but does not receive sufficient funds from the budget to cover costs. In this case, the association had to show solid revenues. Except for the funds of the Party of Yulia Volodymyrivna, the rest of the parties received a total of UAH 1.1 million, the lowest figure for 2.5 years.

Revenues of parliamentary parties in the first half of 2018

From individuals and legal entities in 2017, all central offices of the parties received UAH 7.6 million, making 1.7% of the total party income per annum, including funds from the state budget. Thus, the state provided 98.3% (!) of all the money of parliamentary political forces, although it is worth noting that in different parties this ratio is slightly different: for example, in the People’s Front, this “dependence” on budget transactions is almost one hundred percent, while the Opposition Bloc from the very start of the reform shows a fairly high percentage of receipts from private sources.

In 2018, due to a boost in private funding in Batkivshchyna, the share of state funding in the total amount of revenues of parliamentary parties is already lower – 91%.

As for private contributions, in 2017, 2/3 of all extra-budgetary revenues came from legal entities (5.3 million). They received 2.3 million from natural persons. However, again, we draw attention that the amount and, accordingly, the share of contributions of legal entities may be lower, since several parties, including the presidential Petro Poroshenko Bloc, practice transfers of budget funds to the regions, and regional branches – to the center. Since representative offices in the regions have one account for the most part, it is difficult to say whether there is a “reverse” of budget funds that the party treats as contributions from legal entities (since the branches have this status). Due to this nuance, we also share the revenues and expenditures of the central office of the party and the regions.

In 2018, the situation is the opposite: the share of contributions from individuals is almost 93% of all private receipts: the ratio of UAH 22.65 million to UAH 1.75 million.

Funding of political parties from the budget

The People’s Front receives the most from the budget of the country – in 2017, the sum was UAH 113.7 million, in 2018, it will be UAH 132 million. At the same time, the amount attracted from private sources is also “record”: during the previous year, the party attracted less than UAH 6 thousand (!) from natural persons, which amounts to 0.005% of the total donations to the party, and in 2018, the People’s Front has not yet attracted a single hryvnia.

In addition, this political force has no branches that would work as legal entities and could attract funds; therefore the aforementioned 6 thousand is the only income of the party alternative to state funding.

The second place among the parties that receive the most funds from the budget is held by Petro Poroshenko Bloc Solidarity. In 2017, the party replenished cash by UAH 112,1 million from the budget and UAH 133 thousand from natural persons and legal entities, respectively, contributions from private sources amount to 0.11% of the total income without economic activity. The absolute majority of contributions, in particular 132.8 thousand out of 133 thousand – receipts from legal entities, namely, as noted above, transfers from the regional branches of the Bloc. Also, the party showed quite significant revenues from its own economic activities, namely UAH 150.1 thousand.

In 2018, the president’s party will receive UAH 130.2 million from the budget; from private sources, the party’s central office received UAH 42 thousand from legal entities. As before, funds come from economic activities: this half of the year, the party has received almost UAH 300 thousand.

The Petro Poroshenko Bloc has a medium-sized network of its own representative offices that covers all the regional centers of Ukraine. In 2017, all regional branches of the party received transfers from the party’s center (such a tradition among the parties was introduced by the Poroshenko Bloc) and contributions from natural persons and legal entities. Thus, the party transferred approximately UAH 67 million for the maintenance of branches; the largest tranches were made to Kyiv and Kharkiv branches amounting to UAH 7.4 and UAH 5.6 million. With regard to the financing of branches by natural persons, in 2017, the representative offices received a total of UAH 3.9 million, of which 71% were funds of natural persons, and 29% were provided by legal entities.

Expenditures from the budget for party funding

The third place among the parties with the largest funding is held by the Self Reliance Union with UAH 100.6 million of total income. The party attracted almost a million, in particular UAH 968.3 thousand out of the budget in 2017. The ratio of natural persons/legal entities is almost 50 to 50: 504.6 thousand – from legal entities and 463.7 thousand – from natural persons. Due to the peculiarities of functioning of this party, namely an increased centralism, most of the branches have only formal bank accounts or do not have them at all, while the main amount of funds come to the central account, from which all party expenses are paid.

However, with such a system of party management in the “regions”, Self Reliance raised about UAH 1.1 million of contributions from natural persons and UAH 144 thousand – from legal entities. Kyiv branches, in particular regional and city, ensured almost all of the extra-budgetary revenues

In 2018, the party of Andrii Sadovyi will receive UAH 116.8 million from the budget. In the first half of this year, the political force also replenished its cash from private sources by UAH 702.3 thousand: 390.2 thousand – legal entities, 312 thousand – natural persons.

Fourth place and 11% of the budget cake is received by the Opposition Bloc. The party, which considered it immoral to receive funds from the state treasury, received UAH 48.5 million from the state budget and 3.8 million of financial support from legal entities in 2017. It is significant that even with such sums of funds attracted from private sources, the share of state funding in the party’s total income is almost 93%.

In 2018, the Opposition Bloc will receive a total of UAH 56.3 million of budget support. In the first half of the year, the party also attracted just a little below UAH 8 thousand from legal entities.

The last two places in the ranking of recipients of budget funds are held by the Radical Party of Oleh Lyashko and the Batkivshchyna Union, which received UAH 38.2 million and UAH 29.1 million in 2017, respectively. In 2018, they will receive UAH 44.4 million and UAH 33.9 million. Moreover, the party of Lyashko, as well as the People’s Front, does not have its own branches with the status of a legal entity, therefore all receipts are collected only on the central party account, where also UAH 1.1 million was credited in 2017 as the contributions from natural persons and legal entities, and UAH 362 thousand – in the first half of 2018. In this case, the share of budget financing in terms of all party’s revenues was 97% in 2017 and increased up to 98.4% this year.

Batkivshchyna of Yulia Tymoshenko similar to the party of Lyashko attracted UAH 1.4 million from private sources last year, but the party is distinguished by a very extensive network of its representative offices, with which Svoboda of Oleh Tyahnybok may be the one to be able to compete. So, in the regions, the Tymoshenko’s party, which does not practice transfers of budget funds to the regions, attracted UAH 5.5 million, of which UAH 5.1 million were from citizens and about UAH 400 thousand – contributions of legal entities.

In the second quarter of 2018, Batkivshchyna, as mentioned above, attracted almost UAH 22 million from natural persons and UAH 1.3 million from legal entities.

Contributions in cash from private sources

So, during 2017, we watched a picture that remains relevant even today: parties are funded almost 100% from the state budget, while private sources of income account for only a few percent of total revenues. In addition, in comparison with 2016, the amount of own funds in party’s accounts is decreasing, because according to the current legislation, state financing should be either fully utilized or refunded to the treasury. Therefore, Ukraine should also consider mechanisms for encouraging parties to work more with their own voters and attract funds from private sources, so that the institutional development of political forces does not restrict itself to the adaptation of budget funds.

This publication is issued with the support of the European Union and the Centre for Democracy and Rule of Law (Strengthening RPR Coalition Project) within the framework of the Raising People’s Awareness about the Financing of Political Parties as a Pledge to Reduce Political Corruption in Ukraine Project, which is being implemented by the Eidos Center. The content of this publication is the sole responsibility of the Eidos Centre and in no way reflects the views of the European Union or the Centre for Democracy and Rule of Law.

Kateryna Davydenko, Eidos Centre

The article was originally published on Glavcom