Amendments to the financing of political activities - Tailor-made laws in the Western Balkans and Turkey

Law No. 123/2014 amending the Law on Financing Political Activities (Official Gazette of the Republic of Serbia No. 123/2014)

Act of Parliament, amendment to a law

Substantive: financing of political parties

Personal: political parties, coalitions and citizens’ groups ("political subjects") that are entitled to receive funds for political activities, either for election campaigns or for their work outside of campaign periods

Territorial: Serbia

Temporal: until abrogated

Adopted on 8 November 2014

Entry into force on 18 November 2014

A group of 128 MPs from the ruling Serbian Progressive Party (SNS)

A group of 128 MPs from the ruling Serbian Progressive Party (SNS)

After the parliamentary elections of March 2014, whose organisation and financing cost the public nearly €20 million, several media outlets raised concerns that certain political parties were getting too much public money for campaign financing (see here, here, here and here).

In the last election, the ruling SNS received around €4 million (see here).

In response to media reports that the election campaign was too expensive, the SNS initiated a reduction in the money given to parties from the campaign finance budget. The increase in spending by political parties, along with sharp budget restrictions, prompted a wave of negative reactions in the media and among the public. The ruling SNS reacted to the negative reactions by proposing amendments to the Law on Financing Political Activities: specifically, to reduce funding for regular activities (from 0.15 to 0.105 per cent) and election campaigns (from 0.1 to 0.07 per cent of budget revenue) (see here, here, here and here).

Among the many voices critical of the proposed amendments was the Serbian Anti-Corruption Agency (see here, here and here). In particular, the agency did not support the amendment that allows political parties to use regular funding for election campaigns (see here and here). The SNS’s response to the agency’s concern was that the funds could be used only at election time and not for permanent campaigning.

The agency and opposition MPs also voiced concerns regarding the amendment that allows political parties to buy real estate with public funding (see here and here). According to the agency, the amendment could potentially leave political parties with a surplus of funding to purchase real estate for purposes beyond political activities (see here). In the end, the amendment specified that political parties can buy real estate with public funds only for political purposes, not for commercial purposes (see here, here and here).

Transparency Serbia requested MPs to submit new amendments in order to prevent these contentious issues. In particular, Transparency Serbia highlighted the need not to use regular funding for campaigning because significant budgetary funds were already being allocated for campaign financing. To allocate money twice for campaigning would run contrary to the principles of the budgetary system (see here).

The Parliament of Serbia

Yes

Transparency Serbia urged MPs to submit amendments to prevent these contentious issues. In particular, Transparency Serbia pointed to the use of regular funding for campaigning and argued that allocating money twice for campaigning is contrary to the principles of the budgetary system (see here and here).

There was no initiative to oppose the law before the Constitutional Court. In addition, the law was changed in 2019, but the changes were part of the EU-mediated dialogue between the government and the opposition and had no effect on the changes that had been the subject of tailor-made law-making. In fact, no changes to the 2014 amendments are envisaged (the 2019 initiative came from the government in order to meet ODIHR requests) (see here, here and here). Several opposition parties proposed changes related to the distribution and use of budget funds during the inter-party debate on electoral conditions. However, the ruling parties did not accept their initiatives (see here).

Public finance and political party funding

The main beneficiary of the law was the ruling SNS because of the party’s majority in Parliament and the system for distributing public funding among political parties. According to Article 17 of the Law on Financing Political Activities of 14 June 2011, the allocation of funds from public sources is based on the number of votes received by a political party and it is calculated by multiplying the number of votes up to 5 per cent of valid votes by a quotient of 1.5, and multiplying the number of votes over 5 per cent of valid votes by a coefficient of 1 (see here and here).

The amendment on using regular funding for campaigning ensured that the SNS would have a considerable advantage against other parties in the campaigns of 2016, 2017 and 2018, considering that the SNS has the most seats in Parliament and that funds are distributed in relation to the number of seats (see here). The amendment on the use of public funds to buy real estate benefited mainly those parties with a surplus, such as the SNS (see here).

The direct victims are smaller political parties (currently all in the opposition) and political parties outside of Parliament. The amendments have the most negative impact on new political parties and those competing in elections without having been represented in the previous Parliament. This is because only parties that have seats in Parliament receive money to finance regular work from the Serbian budget. Hence, parties that do not have representatives in Parliament (the opposition boycotted the 2020 elections) do not receive funds to finance their regular work. The money is distributed according to the number of seats won in the most recent election. Accordingly, newly formed parties do not receive any funds from the budget for their regular work. Nor do they receive funds from a public source to finance their election campaign If they want to stand for election. Against this backdrop, the SNS has the advantage because they have had more than 50 per cent of all seats since 2012 (for example, the SNS won 188 seats in 2020).

The differences between political parties brought about by the law in relation to the amount of resources available for election campaigning had an impact on parties’ behaviour to level up the field of competition, and resulted in an increase in total money spent on political campaigning. Specifically, parties tried to compete against the increase in campaign spending by the biggest parties by taking loans (see here).

In the 2016 parliamentary elections, RSD389 million (€3.16 million) out of a total income of RSD1.239 billion (€10.06 million) for all election participants came from the parties' own funds, which they received from budget subsidies for regular work outside of the election campaign period. Out of this amount, RSD351 million (€2.85 million) were reported by the ruling SNS.

Three election participants, including the SNS, covered their election campaign costs with bank loans totalling RSD287 million (€2.33 million). These loans will be paid from the funds that political parties receive to finance their regular work between election campaigns (see here). While all parties would be able to repay their campaign loans from general funding, every party that reported bank loans as a source of income was a member of the government coalition at the time (SNS, SPS and SVM) (see page 14).

The amendments to the law have detrimental consequences for the fulfilment of some democratic principles. The provisions under Article 21 stipulate that all participants in an election campaign should be allocated an equal amount from the budget before the election. According to the law, parliamentary political parties are entitled to share (based on the last parliamentary election results) an amount that is equal to 0.105 per cent of the Republic of Serbia’s budget tax revenues, that is, not a percentage of the total budget, but only of the budget financed through taxes and not through debt. In addition, to cover campaign finance costs, those who participate in elections share (20 per cent equally, the rest based on election results) an additional 0.07 per cent of budget tax revenues. Allowing the use of funds initially allocated for regular work from the public budget for election campaigning implies that those parties with a higher number of MPs have a greater advantage than other parties. Parliamentary parties also enjoy a certain advantage over non-parliamentary competitors, for example in their ability to present themselves to citizens outside election periods (see here).

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