Supporting democratic progress in Ukraine.

IFES Ukraine

The International Foundation for Electoral Systems

Verkhovna Rada passes amendments to the political finance regulation

On December 19, the Verkhovna Rada of Ukraine adopted the Law “On amending certain laws of Ukraine regarding the prevention and counteraction of corruption” in the second reading. The Law brings several positive changes to the current regulation of political finance in Ukraine. It will:

  • Simplify the procedure for making donations to political parties by allowing the use of online banking;
  • Lift the ban on donations to parties by private companies owned by deputies of local councils or people with tax debt;
  • Introduce provisions necessary for establishing an electronic financial reporting system for political parties;
  • Exempt political parties that do not receive public funds from the obligation to undergo external financial audit; and
  • Relax eligibility requirements for audit companies that conduct external financial audits of parties.

All changes are in line with IFES recommendations and will enable political parties to be more effective in the fundraising efforts. Moreover, the Law paves the way for the long-awaited introduction of the electronic reporting system intended to simplify reporting by political parties and oversight by the National Agency for the Prevention of Corruption.

The Law will more than double the total amount of public funding to political parties, beginning from 2021, thereby effectively reversing a previous decision of the parliament to cut this amount in half. This is a positive, but half-backed change, as the eligibility threshold for receiving public funds remains too high at 5 percent, depriving non-parliamentary parties of this right.

Yet, the Law does not address other important issues and legal gaps that prevent the effective realization of the political finance reform, among them:

  • The ceiling on what individuals and companies can donate to parties are unjustifiably high and there is no correlation between the amount of money individuals can donate and their level of income;
  • Third-party spending and in-kind donations lack meaningful regulation;
  • There is no clear definition of how parties can spend public funds allocated from the state budget;
  • There are no procedures regulating how local party organizations receive public funds;
  • There is a lack of effective, proportionate, and dissuasive sanctions for violations of political finance rules;
  • The procedures for documenting administrative offences and for their consideration by courts are unnecessarily complicated.

Moreover, the consideration of the bill lacked transparency and the parliamentary committee on legal policy barred many important stakeholders from participation.

The adoption of the Law “On amending certain laws of Ukraine regarding the prevention and counteraction of corruption” is a positive development as it introduces welcome changes to the current regulation of political finance. However, there are numerous other issues in this area that need to be addressed to facilitate the implementation of political finance reform. A comprehensive law on political finance should be developed through a consultative and transparent process involving all relevant stakeholders.