Thus, Indonesia opted to implement an income-oriented cap instead of an expenditure cap, which is often considered the more effective instrument in controlling party and campaign finances. In terms of transparency, parties were required (under the 2011 law) to have their finances audited once a year and publish the report “periodically.” Similarly, campaign accounts are to be submitted to the National Election Commission (KPU) and are subsequently audited by public accountants appointed by the KPU. The party and electoral laws contain a long catalogue of sanctions for parties and candidates violating these regulations, with punishments ranging from fines to prison terms and disqualification as an electoral contestant.
The third element of the party and campaign financing system consists of state subsidies. Based on the result of each party in the last elections, parties receive annual subventions from the national, provincial and district governments. Between 1999 and 2001, these subventions were given on an ad-hoc basis, with parties paying themselves funds through the KPU (which at that time consisted of representatives of all 48 parties participating in the 1999 elections). In 2001, the payments were regularized through a presidential decree, with each party obtaining Rp 1,000 per vote. This introduced state subsidies as a substantial component of party financing: for instance, the Indonesian Democratic Party of Struggle (PDIP) received Rp 35.7 billion each year at the national level and similar payments at the local level. Thus, from the payments it received in 2001, PDIP could cover more than 50 percent of its 1999 electoral expenses, which were reported as being Rp 69.1 billion.
However, this regulation did not last long. In 2005, a new presidential decree reduced the payments to Rp 21 million per seat, or around Rp 108 per vote. This reduction of almost 90 percent was further institutionalized by presidential decrees in 2009 and 2012, and decrees by the Ministry of Home Affairs in 2009 and 2013. Ironically, the reduction occurred at a time when campaign costs for parties increased exponentially.
The introduction of direct presidential elections in 2004 and direct local executive elections in 2005 increased the number of elections in a five-year cycle from one to around 550. In concert with this, the professionalization of campaigns led to more costs for consultants, opinion polls and media advertisements. PDIP’s campaign costs, for example, shot up to an officially reported Rp 376.3 billion in 2009, while it only received around Rp 1.5 billion in state subsidies at the national level in that year.