Previous to 2015

Of the three ways in which federal parties are allocated public funding, the per-vote subsidy is largely argued as the most democratic as it rewards each vote absolutely equally. However, there are reasons to believe that it creates perverse incentives, such as running for votes where candidates cannot win, thus defeating (at least under first past the post voting) the party's own policy objectives, and muddying its potential alliances with every other party once legislatures sit. Election financing is a complex issue that has been studied in depth academically ^[10]

100% of the voters of eligible parties (99% of all voters in the preceding election) have a say, with their input treated on an equal basis (1 voter, 1 vote).^{[11][12][13][14][5][1][6][7][9][15][16]}

The subsidy entered into effect on January 1, 2004, at $1.75 per vote (indexed to the Consumer Price Index) as part of a set of amendments made by the Jean Chrétien government to the Canada Elections Act which for the first time set limits on political contributions by individuals and organizations (corporations, unions, non-profit groups). The per-vote subsidy was introduced to replace the reliance of political parties and candidates on corporate, union, and wealthy donors in order to reduce the political influence of such donors.^[11][14][17]

After the 2006 court challenge to remove the 2%/5% threshold, the subsidy was reduced to $1.53 by the Harper government on April 1, 2012, and was reduced on each subsequent April 1, until its elimination in 2015.^[9]

Public subsidy of contributions

Political contributions are publicly subsidized via a personal income tax credit that credits 75% of the first $400 contributed, 50% of the amount between $400 and $750, and 33.33% of the amount over $750, up to a maximum tax credit of $650 (reached when contributions by an individual total $1,275 in one calendar year.) As of 2017, the maximum political contribution is $1,550 and increases by $25 each year thereafter. this can be given to the national organization of each party, the tax credit is $650, representing a subsidy of 42%.^{[14][3][18][19]}

(Source: Elections Canada, Statement of Contributions Received, Part 2a^[4])

(Note: The actual numbers of unique individual contributors are likely to be less than the totals shown as multiple anonymous contributions of under $20 by the same person are counted as separate contributors, and contributions made by the same person to both the riding level and at the party level, to different ridings, and/or to different parties are also all counted as separate contributors.)

Electoral expense reimbursement

When an election takes place, perhaps the most significant source of public funding for the federal political parties is the election expenses reimbursement which subsidizes 50% of the national campaign expenses of any party that obtains at least 2 per cent support, or at least 5 per cent in the ridings (electoral districts) in which they presented candidates. In addition to this, the parties' riding organizations are also reimbursed 60% of all expenses incurred by their candidates in each riding where they obtained at least 10% of the votes, plus 100% of allowable "personal expenses". The reimbursements are also referred to as "government rebates", "government transfers", or "election rebates".^[1]

Under this subsidy, the more a party spends, the more they are subsidized. The subsidy therefore magnifies the public funds allocated by tax credits on political contributions and by the per-vote subsidies. It also means that loans to political parties and their candidates can play a significant role in determining how much public money is received by the parties.^[1]

During the 2008 election, the Conservatives spent the most, and, as a result, received the largest reimbursements under this public subsidy in 2009.^[1]

Breakdown of paid election expenses by expense category - 2008 general election (source: Election Canada^[20]

Distribution of public funding amongst parties

Public funding of the five largest federal political parties in 2009 per vote received in the preceding election

Cost of fundraising

In order to solicit political monetary contributions, fundraising is a major focus for many parties that involves hiring fundraising experts, and employing sophisticated database systems, email lists, newsletters, and telemarketing.^{[2][8][21][22]}

The Conservative Party, for example, is reported to make phone calls or send letters to about 200,000 people a month, and conducts surveys to collect and feed information on the views of individuals into its database referred to as CIMS, an acronym for "Constituent Information Management System". The information stored in the database is then used to customize mailings and phone calls for each targeted donor to appeal to them specifically on issues that they are known to react more strongly to.^[21][22]

Other associated overhead for fundraising include legal consultation, processing, accounting, auditing, and reporting costs.

(Sources: Elections Canada, Globe and Mail^[4][21][23])

Party-level fundraising costs vs. party-level contributions raised at top three Canadian federal parties in 2009 (source: Elections Canada^[4])

Party-level fundraising costs vs. net private funds raised at top three Canadian federal parties in 2009 (source: Elections Canada^[4])

In 2009, the overhead cost of fundraising for the top three parties exceeded the net private funds they raised. They spent a combined $11.2 million on fundraising at the party level (riding-level expenses not included), according to their 2009 annual party returns, to raise approximately $10.3 million in net private funds.^[4]

Election Expenses Act (1974)

The Election Expenses Act of 1974 introduced limits on election expenses for candidates and political parties, along with public funding in the form of partial reimbursements of expenses and tax credits for contributions.^[24]

As of January 1, 2004, the scope of legislation was enlarged to include electoral district associations, nomination contestants, and leadership contestants, and stricter limits on contributions were introduced.^[24]

At the same time, a new source of public funding was introduced in the form of the per-vote subsidy paid to registered parties. Until the ultimate discontinuation of the subsidy in 2015, every registered federal political party received an annual, inflation-indexed subsidy of $1.53-$2.04 per vote received in the preceding election.^[1]

In 2006, in an Ontario Court of Justice ruling,^[25] several small federal parties successfully challenged restrictions that limited expense reimbursements to parties receiving at least 2% of all valid votes cast in the preceding general election, or at least 5% of the valid votes cast in the electoral districts in which it had a candidate. Judge P. Theodore Matlow ruled that the law made it difficult for members of small parties to "play a meaningful role in the electoral process."^[26] The successful parties were reimbursed retroactively for the funds that had been withheld from them.

However, the removal of this restriction opened the government to criticism for its funding of controversial small parties including the Marijuana Party of Canada, Communist Party of Canada, and Christian Heritage Party of Canada, who had participated in the suit along with the less-controversial Green Party of Canada, Progressive Canadian Party of Canada and Canadian Action Party.

As of January 1, 2007, corporations and trade unions were barred from making political contributions.^[24]

The Keeping Canada’s Economy & Jobs Growing Act, introduced in October 2011, triggered a phase-out of the per-vote subsidy from 2012-2015.^[27]

The amount paid out to parties decreased from approximately $2 per vote in 2012 to approximately $0.50 per vote in 2015, the final year of the subsidy.^[28]

Contribution limits were increased in 2014. Spending limits for parties and candidates were increased by 5%.^[24]

Per-vote subsidy

The elimination of the per-vote subsidy in 2015 attracted both support and opposition.^{[11][12][13][14][5]}

Magnification of the choices of contributors

While only a tiny fraction of registered voters make political contributions, their net contributions get magnified several times over by the public subsidy of political contributions and the public subsidy of election expenses.^[1][4]

Over half of all the public funding for federal parties in 2009 was effectively directed by less than 1.2% of the number of registered voters in Canada, without participation by 99% of registered voters.^[1][4]

Overall, the subsidy of political contributions resulted in 64.2% of all of the funding in 2009 being directed according to the partisan preferences of less than 1.2% of registered voters.^[1][4]

Composition of participation

With the per-vote subsidy, 100% of voters of eligible parties (99% of all valid votes in 2009) participate in determining the distribution of the funds, and do so all on an equal basis. The participants are all the Canadian citizens over the age of 18 that voted in the preceding federal election, and numbered 13,675,146 Canadians in 2009.

With political contributions, the participants - numbering only a nationwide total of between 196,186 and 278,620 unique individuals in 2009, and representing less than 1.2% of the number of registered voters - tend to be individuals that have more disposable income. The poor, by and large, do not make political contributions, and, according to University of Calgary political finance expert Lisa Young, people that have more comfortable means, and that can expect to obtain a larger tax credit against their income, are more likely to make political contributions.^[13][8][29]

According to McMaster University political scientist Henry Jacek, political contributions tend to come from the wealthy, and not the poor. It is also clear from other jurisdictions in the world that political donors typically are people that have more disposable income.^[8][29]

While political contributions can only be made by Canadian citizens, there is no age restriction in place, which allows political contributions to be made in the name of children to bypass contribution limits.

In 2006, Liberal leadership candidate Joe Volpe returned $27,000 in political contributions that had been made in the name of children - after it was revealed that his campaign donors included 11-year-old twin boys and a 14-year-old boy who donated $5,400 each, the allowed maximum. The children and several other donors that had contributed the maximum allowable $5,400 each - for a total of $108,000 - were all in some way connected to the top corporate executives of one pharmaceutical company. No law was broken.^[14][49]

Level of participation in determining funding

In 2009, a national total of 181,858 individuals (out of 23,677,639 registered voters in 2008) made political contributions to a federal political party organization, resulting in a 0.77% fraction of registered voters directing over $33 million in subsidized contributions - almost two-thirds of it publicly funded - toward their preferred parties. Over 55% of these individuals were Conservative party supporters.^[4]

A national total of 96,762 individuals also made political contributions at the riding association level to a federal political party, resulting in a 0.4% fraction of registered voters directing over $12 million in subsidized contributions - over 60% of it from public funds - toward their preferred parties.^[4]

Combined, the number of unique individuals that made political contributions in 2009 to a federal political party, either at the national party organization level or riding level, or both, is somewhere between 196,186 and 278,620 individuals – representing between 0.8% and 1.2% of the number of registered voters from 2008.^[4]

Rounding to the nearest percentage, only 1% of registered voters directed $46 million – representing over 62% of the primary funding received by parties – toward their preferred party, with nearly two-thirds of that - $28.5-$31 million - in public funds directed without the consent of 99% of registered voters.^[1][4]

(Source: Elections Canada^[4])

Corrupting influence of fundraising

In 2006, it was revealed during the Liberal leadership contest that one candidate, Joe Volpe, had received a total of $108,000 in contributions from 20 individuals that were all in some way connected to the top corporate executives of Apotex Pharmaceuticals. Each of the 20 individuals – which included 11-year-old twin boys and a 14-year-old boy – gave exactly $5,400, the maximum allowed at the time.^[14][49]

According to political financing expert Louis Massicotte, a political scientist from Université Laval, political systems that rely heavily on political contributions from individuals can encourage corruption. In 2010–2011, it was discovered that corporations had been funnelling money to major provincial political parties by disguising the corporate funds as individual political contributions made by their employees, circumventing the political fundraising laws. Former employees of one corporation flatly admitted that political contributions had illicitly been made in their name.^[35]

At the provincial level in Quebec, the far-reaching influence of fundraisers over everything from the selection of judges to the distribution of construction contracts fuelled widespread demand for a public inquiry into political corruption, and caused the Jean Charest Liberal government and other major political parties to agree to increase the provincial per-vote subsidy as a way to reduce the influence of party bagmen (influence peddling political fundraisers) over government decisions and policies.^[35]

Transparency

Until the enactment of the Elections Modernization Act in 2018,^[50] political parties were only required to report the identities of contributors that had given a total of over $200 to one riding association or the central organization. For donations of $200 or less, receipts had to be kept by the individual riding associations, but Elections Canada had no way to keep track of them. Completely anonymous contributions of $20 or less are permitted.^[51][52][53]

Disclosure of political contributors to Elections Canada in 2009 (all federal parties and riding associations) (source: Elections Canada^[4])

(Source: Elections Canada^[4])

In 1997, Industry Minister John Manley disclosed the identities of individuals and corporations that contributed $10,150 and $15,800, respectively, to his re-election campaign. However, he did not disclose where $74,664 – received through his riding association – had originally come from.^[14][54]

In July 2002, Paul Martin refused to reveal the names of donors to his leadership campaign, claiming that new disclosure rules brought in a month earlier applied only to current cabinet and not to a former cabinet minister as he was, and that he did not think it would be fair to name people who had donated to his campaign before the new disclosure rules were in effect.^[49]

In October 2002, Stephen Harper initially did not reveal the names of anyone who had donated to his leadership campaign. While he later quietly posted a few names – those of 54 donors who had given more than $1,075 each – he continued to keep secret the identities of 10 other large donors and the names of more than 9,000 donors who gave sums of less than $1,000 each.^[49]

In 2009, an annual report by Global Integrity, an independent non-profit organization that tracks corruption trends around the world, said that Canada posted a slight "downward tick" based on secrecy surrounding political financing and gaps in government accountability.^[55]

According to Global Integrity, "Canada is a really interesting case" in that while it had a generally positive rating, there are "unique gaps in the system that are strange", including that political financing loans to candidates are confidential.^[55]

According to Ottawa-based Democracy Watch: "Government integrity continues to be undermined by loopholes that allow secret donations to some candidates."^[55]

Loopholes in contributions limits

Elections Canada confirmed in 2007 that individuals could illegally contribute as much as $60,500 over the $1,100 limit and not be detected - simply by donating $200 to each of a party's 308 riding associations.^[51][52][53]

Elections Canada claimed that it currently cannot track donations of $200 or less because "we do not get the receipts" from the individual riding associations.^[52] Under current regulations, a party's individual riding associations are only required to report the identities of contributors with total contributions to the riding of over $200. Contributions of $200 or less are allowed to be reported in aggregate, with no break-down by contributor required that would allow for proper cross-checking across a party's ridings associations.^[51][52][53]

At the time, the NDP called for the loophole to be plugged. The Conservative government responded that "this is no more a loophole than the fact that someone can break the law by fraudulently misstating their income on their income tax." It rejected calls by the opposition for Elections Canada to be given new measures and tools to be able to detect multiple donations across a party's ridings that exceed the contribution limit.^[53]