Party and campaign financing is a controversial topic in South Korea. Due to the low rate of fee-paying membership in political parties (on average less than 0.1% of party members), candidates in elections have to spend huge amounts of money to hire supporters and place advertisements. Parties receive public subsidies according to their share of the vote in the most recent elections. However, a larger share of campaign financing comes from private donations. Nowadays some election candidates raise funds under a special investment (not donation) account, which has emerged as a new popular trend. Although election laws strictly regulate political contributions, efforts to make the political funding process more transparent had only limited success. Many violations of the political funds law are revealed after almost every election and many elected officials or parliamentarians have lost their office or seats due to violations. The heavy penalties associated with breaking the political funds law have only had limited effect on the actual behavior of politicians and breaking the election law carries little stigma.
Legislation on campaign financing is addressed in the Political Fund Act 1965 which was amended in 2012, and the Public Official Election Act of 1994 (19 January 2012 version). The law on election financing in 1965 was revised in 2000 to prevent the illegal financing of political activities and to create a legal and transparent basis for political financing. In 1999, a President with no ties to the business sector was elected and an anti corruption program launched. As a result, there are stricter rules in place to regulate donations and contributions from corporations and individuals. In 1994, a law (amended in 2000) was adopted on the election of public officials and preventing malpractice in Electoral Matters.
The NEC oversees issues of campaign financing. It is also responsible for providing subsidies to political parties, controlling the establishment and activities of associations of supporters, collecting and distributing political funds and monitoring their use under the conditions prescribed by law on financing policy. The NEC also has a regulatory authority for the implementation of the legislation on the financing of election campaigns, including the application of certain provisions of the law on election financing. The laws related to the political funds are law to protect the political parties and the state can subsidize the funds that are necessary for the operation of political parties in the article 8 of the constitution, law related to the finance matters of the political parties includes both income and expenditure of the party in the article 34 of Political Parties Act and the Political Fund Act.
Every political party may collect membership fees from its members to promote the input from inside and financial independence of the political party. The person in charge of the accounting of a party should deliver a receipt of such membership fee to the relevant party member within 30 days from the date of receiving the fee. For instance, the political party activity and accounting 2019 report that the Minjoo Party of Korea got the highest membership from its party members compared to other political parties in 2018.
However, a member cannot pay membership fees for other members even from the same party. The Political Fund Act also defined that foreign nationals, corporations, and organizations both foreign and domestic are ineligible to make political donations. Both the corporations and organizations are also not allowed to use their employees, constituents, or family members to make the donations expediently. Any person, who is not restricted to contribute the money, should deposit the political funds within the limitation in person with this real name to the Election Commission. The anonymous donations below 100,000 won at each time or 1.2 million won annually are allowed.
In order to solve the corruption in the process of political donations funds, the Political Fund Associations (PFAs) are established as the middle actors to receive the political donations fund and registered with the relevant election commission under the Political Fund Act. The donations fund to the political parties and candidates have to go through the process such as donors to the PFAs for a Political Party and later on the PFAs will pay to the Political Party or Politician after they deduct the direct expenses. Therefore, the donations are only allowed to go through the PFAs. Similarly, to ensure the health of democratic politics and prevent the harmful act of receiving illegal political funds, the political deposits of the party have to go through the process such as depositor to NEC (NEC will also provide the deposit receipt to the depositor) and NEC will be distributed to the political party.
There is no limit of contribution to political parties, however, there is a regulation that an individual may not contribute more than a total of 20 million Won a year to the PFAs. There are also limits of 10 million Won/ year to candidates and reserve candidates for Presidential Elections and candidates for the intra-party competitive election for Presidential Elections. No more than 5 million Won/year may be donated to National Assembly Members, candidates and reserve candidates for the National Assembly election for a local constituency, candidates for the Party Leadership Elections, candidates for the Election of Governors and Mayors of the Special City and Metropolitan Cities. These limitations of the amount of cash contributions for the elections are stated in article 2 of the Political Fund Act and the amount cannot exceed 10 % of the election expenses.
Public Campaign Financing
The national subsidy or public funding system was introduced in the 1980s and it aimed to mitigate the issue of political corruption by preventing the political parties from donor domination. Moreover, it is also to promote fair competition between political parties and to enhance the participation of women and socially disadvantaged people in the candidates. A system of public funding is provided for election activities and there are four types of subsidizing. First, the “National Current Subsides” which provides the grants every quarterly for the operation of the political party. Second, the “Election Subsidies”_ the state provides the subsidies to the candidates of political parties who run in the public official elections and it pays within two days after the deadline for the candidate registration, especially for presidential, legislative and local elections. Both public subsidies are distributed based on the number of voters during the last National Assembly and multiplied by the subsidy unit price. For instance, there are 11 billion Korean won for the 11 political parties as the National current subsidies for the 1st quarter of 2020 and 44 billion Korean won for 12 political parties as the election subsidies during the 21st National Assembly elections in March 2020.
To encourage the participation of women and socially disadvantaged groups of people, there are also the “Public Grant for Female Candidates”_ given to the political parties for the expenses of female candidates and the “Public Grant for Disabled Candidates”_ paid to the political parties for the expenses of the candidates with physical disabilities in the both National Assembly and Local Councils” elections. Both grants would be distributed within the period of two days after the deadline of candidate registration. In the 2020 National Assembly election, the NEC provides about 840 million Korean won for a political party under the subsiding of female candidates nomination while there are 250 million Korean won for the Disabled candidates nomination.
Limits on Campaign Fund Expenditures
The provision that regulates how the party should spend the subsidies is National subsidies are for the operation of political parties. They can only be used for the following expenses.
(i) Personnel costs
(ii) Office equipments and consumables
(iii) Office installation and operation costs
(iv) Public utility charges
(v) Policy development expenses
(vi) Education and training costs of the political party members
(vii) Organizational activities costs,
(viii) PR costs and
(ix) Election-related expenses.
The political parties that have received general subsidies must distribute 30% or more of the total amount to the party’s policy research center and 10 % or more are for the political development of women participation and other 10% or more should be distributed to the Si/Do parties offices. However, the amount of subsiding can be reduced in the case of submitting the false accounting reports related to the subsidizing (reduced two times of the amount falsely reported), use for the limited purposes (reduced two times of the amount that is used for the prohibited purposes) and in the case of do not submit the accounting report (have to pay the 25 % of subsidies fund for the Central Party Office and the Si/Do political party offices have to pay two times of the received from the central office).
Reporting of Fund
An accounting report is a report details of both revenue and expenditure of political funds, property status, settlements and copies of bankbooks. In article 40 of the Political Fund Act, it has to submit to the relevant election commission within a certain period. This reporting system aims to hold the transparency, accuracy and legitimacy of the income and expenditure of political funds. Moreover, the article 37 of the Political Fund Act states that both the political parties and other stakeholders such as PFAs and PFA appointers, candidates and preliminary candidates have to submit the accounting reports. In terms of reporting, the PFAs have to submit twice a year while the political parties and the National Assembly members have to submit once a year.
Provisions for Free or Subsidized Access to Media
Political parties could have their policies broadcast in the form of party’s representative speech twice a month during about 4 months before the election period and the cost of the broadcasting is borne by the political parties. When a political party having negotiating group in the National Assembly has its policies broadcast using public broadcasters during the period, it bears the cost only half of the broadcasting times. Political parties are reimbursed campaign expenses including the cost of broadcast and print advertisements according to their candidates’ performance in the presidential election: reimbursed 100% of campaign expense when obtaining 15% or more of valid votes, 50% of campaign expense when obtaining more than 10% to less than 15% of valid votes.
Based on the article 71 of the Public Official Election Act, all the candidates and their campaign speech broadcasting shall be equally treated. However, the time given for the campaign on television and broadcasting will be different based on the elections as follow;
(i) For the candidates or a campaign speech maker who is nominated for the Presidential election, there will be up to 11 times by television and radio broadcast and each time will get only 20 minutes.
(ii) For the PR National Assembly election, the two representatives from the political party get one time and 10 minutes for that.
(iii) For the members of local constituencies and heads of autonomous Gu/Si/Gun election of National Assembly, get up to two times and 10 minutes for each time with the local broadcasting facility.
(iv) For the PR City/Do council members of PR election, they have a chance to mark their campaign speech one time within 10 minutes.
(v) For Election of Mayors/Do Governors, get a chance for five times and 10 minutes for each.
Other Form of Indirect Public Funding
Since the 5th amendment to the constitution in 1962, the publicly-funded election system has been introduced. The political parties or candidates can get the reimbursement for the amount of election expenses through this system within the election expense limit and they can be reimbursed within the 60 days after the election day.
The State or local governments will provide these following expenses for the candidates during the election campaign.
(i) Expenses for advertisements in newspapers, broadcasting media and television
(ii) expenses for holding the policy debates or discussion in the public place
(iii) expenses for making business cards
(iv) expenses to make election posters, materials, pledges, and candidate pictures
(v) costs of election campaign items and
(vi) the allowances for the election campaign staff.
According to the Public Official Election Act, the submission of accounting documents or financial transaction data related to the political funds are required in the Political Fund Act. The Major Crimes are as follow;
(i) A person donates funds directly to the political party or a candidate without going through a PFA, the punishments are five years in imprison along with the 10 million Korean won fines.
(ii) Using political funds for private or other purposes can be punished with two years in prison and four million Korean won.
(iii) Using or spending the political fund excess the donation limit or donating political funds without using a real name can be punished with two million Korean won.
(iv) Failure to submit the accounting report or submit the false information can be punished three years in prison or be fined six million Korean won.
(v) Issues the false receipts of party membership fee which is different from the actual donated amount can be punished three years in prison or six million Korean won.
(vi) In the case of donors donating more than the limit that they can donate to a PFA, they could be punished for five years in prisons or be fined about ten million Korean won.