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Corporate funding to political parties should be treated as expenditure in order to increase transparency in financial statements and curb black money flow, according to accounting regulator ICAI,.
It also said that the Companies Bill incorporate this provision.
“If a company makes contributions (funding) to any political party, it should be treated as an expenditure. It will lead to much more transparency in financial statements and it will also reduce black money,” the ICAI President, Mr Amarjit Chopra, said.
“Let it be more transparent ... from where political parties are getting funding (for carrying out their activities).”
The Institute of Chartered Accountants of India has been entrusted by the Election Commission of India with the task of developing accounting format for political parties.
Interim report
Mr Chopra said the institute will be submitting a final report to the Election Commission in 10 days. “We have already submitted our interim report in this regard to the Election Commission and we will submit our final report within the next 10 days.”
Noting that the companies were making financial contribution to election parties in a “clandestine” manner, he suggested certain minimal percentage of turnover of a company could be allowed as an expense for the purpose of providing funds to political parties.
“Any minimal percentage of total turnover to be contributed (by a company) could be allowed as expenditure,” he said.
Throwing light on practice adopted by corporate for giving funds to political parties, the ICAI President disclosed that several companies routed funds meant for political parties by creating trusts. “Various companies have created trusts… they make payment to these trusts and through these trusts, the funds are routed (to parties) ... every top industrialist is doing that.”
ICAI has also recommended rotation of auditors for political parties. “We have told them (the commission) that rotation of auditors is good.”
Mr Chopra pointed out that political parties generally do not rotate their auditors, which results in a conflict of interest. “The same Parliamentarians who sit on standing committee of Parliament on finance, which recommends rotation of auditors for companies, are not willing to accept rotation of auditors for election parties... it is very strange,” he said.
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