Tackling Corruption in Government
IMF Blog, April 4, 2019
Source details
- Canonical URL
- Tackling Corruption in Government
Other formats
Bibliographic details
- Authors: Vitor Gaspar, Paolo Mauro, Paulo Medas
- Published: April 4, 2019
Overview
- No country is immune to corruption. The abuse of public office for private gain erodes people’s trust in government and institutions, makes public policies less effective and fair, and siphons taxpayers’ money away from schools, roads, and hospitals.
- Corruption corrodes the government’s ability to help grow the economy in a way that benefits all citizens.
- Political will to build strong and transparent institutions can turn the tide against corruption.
- The analysis is based on a new Fiscal Monitor that shines a light on fiscal institutions and policies, like tax administration or procurement practices, and shows how they can fight corruption.
Corruption and tax revenue
- Analysis covers more than 180 countries.
- More corrupt countries collect fewer taxes as people pay bribes to avoid them, including through tax loopholes designed in exchange for kickbacks.
- When taxpayers believe their governments are corrupt, they are more likely to evade paying taxes.
- Overall finding: the least corrupt governments collect 4 percent of GDP more in tax revenues than countries at the same level of economic development with the highest levels of corruption.
- Country examples:
- Georgia reduced corruption significantly and tax revenues more than doubled, rising by 13 percentage points of GDP between 2003 and 2008.
- Rwanda’s reforms since the mid-1990s led to tax revenues increasing by 6 percentage points of GDP.
- Resource-rich countries, on average, have weaker institutions and higher corruption, so corruption prevents people from benefiting fully from wealth created by natural resources.
Corruption and public spending / waste
- Countries with lower levels of perceived corruption have significantly less waste in public investment projects.
- The most corrupt emerging market economies waste twice as much money as the least corrupt ones.
- Waste arises from cost overruns due to kickbacks or bid rigging in public procurement; less corrupt countries invest money more efficiently and fairly.
- Corruption distorts government priorities:
- Among low-income countries, the share of the budget dedicated to education and health is one-third lower in more corrupt countries.
- In more corrupt countries school-age students have lower test scores.
- State-owned enterprises and public utilities tend to be less efficient in countries with high levels of corruption.
Institutional reforms and lessons for fighting corruption
- Fighting corruption requires political will to create strong fiscal institutions that promote integrity and accountability throughout the public sector.
- Lessons based on research:
- Invest in high levels of transparency and independent external scrutiny to allow audit agencies and the public to provide effective oversight.
- Examples: Colombia, Costa Rica, and Paraguay use an online platform that allows citizens to monitor the physical and financial progress of investment projects.
- Norway has developed a high standard of transparency to manage its natural resources.
- A free press enhances the benefits of fiscal transparency; in Brazil, the results of audits impacted the reelection prospects of officials suspected of misuse of public money, but the impact was greater in areas with local radio stations.
- Reform institutions comprehensively: reforms designed to tackle corruption from all angles have greater chances for success.
- Example: reforms to tax administration will have a greater payoff if tax laws are simpler and reduce officials’ scope for discretion.
- The IMF has built comprehensive diagnostics on the quality of fiscal institutions, including public investment management, revenue administration, and fiscal transparency.
- Build a professional civil service: transparent, merit-based hiring and pay reduce opportunities for corruption; agency heads must promote ethical behavior by setting a clear tone at the top.
- Keep pace with new challenges as technology and opportunities for wrongdoing evolve: focus on high-risk areas such as procurement, revenue administration, and management of natural resources, and strengthen effective internal controls.
- Example: electronic procurement systems in Chile and Korea have been powerful tools to curtail corruption by promoting transparency and improving competition.
- More cooperation to fight corruption across borders:
- More than 40 countries have made it a crime for their companies to pay bribes to gain business abroad under the OECD anti-corruption convention.
- Countries can also aggressively pursue anti–money laundering activities and reduce transnational opportunities to hide corrupt money in opaque financial centers.
Key takeaways and policy priorities
- Curbing corruption requires persevering on many fronts but pays huge dividends.
- It starts with political will, continuously strengthening institutions to promote integrity and accountability, and global cooperation.
- Priority actions:
- Strengthen fiscal institutions and transparency.
- Implement comprehensive, cross-cutting reforms (tax laws, procurement, public investment management).
- Professionalize civil service and set clear ethical leadership.
- Use technology (e.g., electronic procurement) to reduce opportunities for corruption.
- Enhance international cooperation on anti-bribery and anti–money laundering efforts.
Vitor Gaspar, Paolo Mauro, Paulo Medas — April 4, 2019
References
- عربي
- 日本語
- Português
- Fiscal Monitor
- https://www.imf.org/wp-content/uploads/2019/04/fmch2-1.png
- https://www.imf.org/wp-content/uploads/2019/04/fmch2-2.png
- public investment management
- fiscal transparency
- Shining a Bright Light into the Dark Corners of Weak Governance and Corruption
- Corruption Disruption
- Corruption in Latin America: Taking Stock
