Towards an organisational perspective on party funding: Explaining financial transfers from MEPs to their national parties

Which parties represented in the European Parliament are able to extract regular donations from their MEPs' salaries and how big are these donations respectively? In the literature on party finances, there has been a lack of attention paid to the use of salaries of elected representatives as a source of funding. This is surprising given that the national headquarters of many parties in Europe regularly collect 'party taxes': a fixed (and often significant) share of their elected representatives' salaries. This paper, in filling this gap, theoretically specifies two sets of party characteristics that account for the presence of a taxing rule and the level of the tax respectively. The presence of a tax depends on the basic ‘acceptability’ of such an internal obligation which rests on a mutually beneficial financial exchange between parties’ campaign finance contributions to their Members of the European Parliament (MEPs) and MEPs’ salary donations to their parties. The level of the tax, in contrast, depends on the level of intra-organizational compliance costs and parties’ capacity to cope with these costs. Three factors are relevant to this second stage: MEPs’ ideological position, the size of the parliamentary group and party control over candidate nomination. Our framework is tested through a selection model applied to a unique dataset covering the taxing practices in parties across the European Union member states