Kuala Lumpur, 19 December 2023: Today, the Institute for Democracy and Economic Affairs (IDEAS) launched a new policy brief titled “Tax Incentives for Political Donations: Lessons for Malaysia” authored by Syazwan Zainal and Tan Wan Ying. This brief seeks to examine the tax incentives used in Germany, Canada, Thailand and Australia to encourage political donations from the public. The literature suggests that tax incentives can be used as a tool to encourage the public to donate to political parties and politicians in a transparent and accountable manner while increasing public participation in the political process. 

The tax regimes in Australia, Thailand and Germany use tax deductions while Canada uses tax credits, with different rates and requirements in each country. Some of the requirements include limits on the amount of donations to mitigate the risk of outsized influence of big money, prohibited donors such as foreign entities and disclosure or reporting requirements to ensure transparency. The regulatory ecosystem can be used as a reference for future policymaking on political donations in Malaysia. 

Tax incentives can be a useful way to encourage people and corporations to donate to the party that they believe in and compensate for the fear that both parties and the public have of the requirement for transparency and accountability. As such, tax incentives can be part of more comprehensive reforms of political financing in Malaysia, which should include public funding of political parties and transparency requirements for political donations, as outlined by the Political Financing Bill proposed by the All-Party Parliamentary Group (APPG) on Political Financing, in which IDEAS serves as Secretariat. 

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