10/23/2012 02:06 EDT | Updated 12/23/2012 05:12 EST

Bill C-21: Plan To Close Political Loans Loopholes May Need A Redo


OTTAWA - A bill aimed at closing loopholes in the law governing political loans is such a complicated mess that even Conservative MPs are suggesting the government go back to the drawing board.

Chief electoral officer Marc Mayrand told a Commons committee Tuesday that Bill C-21 does not accomplish its goal: ending the ability of candidates to bypass strict limits on political donations by taking out hefty loans that often go unpaid for years.

He said the bill is too complex, fails to close some existing loopholes and actually creates some new ones.

After listening to Mayrand's detailed analysis of the bill's flaws, even Conservative members of the committee seemed to think it's not salvageable in its current form.

"You've raised a lot of interesting points today," said Conservative MP John Williamson, a former communications director for Prime Minister Stephen Harper.

"It sounds almost like we've gone from a real mess into a swamp."

Fellow Conservative Tom Lukiwski, parliamentary secretary to the government House leader, suggested the government may have to start over.

"Obviously, we have the ability to amend the bill," Lukiwski said. "The minister may want to take a look at going back to the drawing board, so to speak."

Bill C-21 is the Harper government's fifth attempt to reform the law on political loans, all of them motivated by Conservative outrage over allegedly deadbeat Liberals who've failed to pay back loans taken out during their 2006 leadership contest.

Most contenders from that contest went well beyond the 18-month deadline for loan repayment. Three — Vancouver MP Hedy Fry and former MPs Joe Volpe and Ken Dryden — have still not repaid all their loans.

The bill makes one significant change that would make it easier for erstwhile leadership contenders to raise the money needed to pay off their loans. Instead of limiting donors to a one-time maximum of $1,200 per leadership contest, it would allow individuals to contribute $1,200 each year.

The bill would amend the Canada Elections Act, making it illegal for corporations or trade unions to lend money to any election candidate, party, riding association or leadership contender. Individuals would be limited to loaning no more than $1,200, the same as their donation limit.

Loans greater than $1,200 could only be issued by banks or other accredited financial institutions at commercial rates of interest. All loans would have to be paid off within three years and riding associations or parties would be held responsible for any unpaid loans taken out by their candidates.

The bill would also require more transparency in reporting details of loans, guarantors and repayment regimes.

The existing law on loans "is already quite complex and C-21 does not reduce that level of complexity, it builds on it," Mayrand said after his testimony to the committee.

"And I think it's not good for democracy when citizens don't know exactly how they go about making valid contributions to democracy."

While "the principle of the bill is laudable," Mayrand told the committee the bill would create a complicated regulatory and paperwork nightmare for candidates, parties and, ultimately, for Elections Canada, which would have to administer the new law.

"There is also a risk that this would lead to a proliferation of cases of non-compliance and create an incentive to find ways to circumvent the rules," he said.

Among other flaws, Mayrand said the bill does nothing to stop an individual from selling unlimited goods and services on credit to a campaign — essentially rendering the $1,200 limit on direct loans from individuals meaningless.

And he said it will make it particularly hard for independent candidates, who are not back-stopped by a party with deep pockets — to obtain loans.

Mayrand also said the provision making parties and riding associations responsible for their candidates' unpaid loans would not apply to leadership or nomination contestants. He recommended parties be held responsible for the outstanding debts of all their affiliated entities, with the possible exception of leadership contenders.

For the latter, he suggested the penalty for failing to repay loans should be a ban on running again.

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