{ "title": "The True Cost of Global Corruption", "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2019/09/the-true-cost-of-global-corruption-mauro", "canonical": "https://www.imf.org/en/publications/fandd/issues/2019/09/the-true-cost-of-global-corruption-mauro", "overlayPath": "/en/publications/fandd/issues/2019/09/the-true-cost-of-global-corruption-mauro/index.md", "summary": "Global corruption distorts the activities of the state and ultimately takes a toll on economic growth and the quality of people’s lives, says the IMF’s Paul Mauro, Paulo Medas and Jean-Marc Fournier.", "sections": [ { "heading": "Overview", "content": "- Corruption—defined as the abuse of public office for private gain—distorts state activities, reduces economic growth, and lowers quality of life.\n- Corruption reduces tax revenue, leads to overpayment for goods and services and investment projects, and distorts spending priorities away from education, health care, and effective infrastructure.\n- Examples include Operation Car Wash (Petrobras, Brazil) and past bribery scandals in Japan that helped motivate anti-bribery legislation." }, { "heading": "Fiscal impact and key statistics", "content": "- The least corrupt governments collect 4 percent of GDP more in taxes than those at the same level of economic development with the highest levels of corruption.\n- If all countries reduced corruption similarly to recent progress in some places, they could gain $1 trillion in lost tax revenues, or 1.25 percent of global GDP.\n- Public procurement accounts for 13 percent of GDP, on average, among members of the Organisation for Economic Co-operation and Development, which represents 36 advanced economies.\n- Among low-income countries, the share of the budget dedicated to education and health is one-third lower in more corrupt countries.\n- Case study (Georgia): tax revenue jumped from 12 percent to 25 percent of GDP in five years after an aggressive anti-corruption campaign—even as tax rates were lowered.\n- Civic attitudes in Georgia changed: the share of people who felt it was never justifiable to cheat jumped from about 50 percent to almost 80 percent.\n- More than 40 countries have criminalized payments by their companies to bribe officials abroad." }, { "heading": "Hot spots of corruption", "content": "- Natural resources (especially oil and mining): outsized extraction profits incentivize bribes and state capture; resource-rich countries tend to be more corrupt due to weaker institutions and poor accountability.\n- State-owned enterprises (SOEs): management may be susceptible to undue influence, making SOEs in energy, utilities, and transportation less profitable and efficient in more corrupt countries; examples cited include Petrobras (Brazil), Elf Aquitaine (France, before privatization), Eskom and Transnet (South Africa).\n- Public procurement and public investment: large sums involved and unique project features make it harder to compare costs and easier to conceal bribes and inflate costs; grand corruption often associated with complex projects such as construction and defense equipment.\n- Revenue administration and discretionary tax systems: complex and opaque tax codes increase opportunities for officials to solicit bribes and for legislators to introduce exemptions or loopholes in exchange for payments." }, { "heading": "Social and developmental consequences", "content": "- Distortion of spending priorities drains resources from education, health care, and infrastructure—investments critical to sustainable and inclusive growth.\n- Test scores tend to be lower in more corrupt countries despite similar classroom time; teacher hiring and absenteeism can be influenced by bribery or connections.\n- In Brazil, where federal transfers for education were partially lost to corruption, dropout rates were higher and test scores worse.\n- Improvements in public services (lower crime, fewer power outages) can boost tax compliance and trust in government, reinforcing fiscal gains." }, { "heading": "Institutional and technological levers for reform", "content": "- Success is more likely when countries improve several mutually supporting institutions simultaneously.\n- Priority areas to start with: procurement, revenue administration, management of natural resources, and effective internal controls.\n- A fiscal governance framework requires a professional and ethical civil service; heads of agencies, ministries, and public enterprises must set a clear tone at the top.\n- Investing in information and communication technologies and transparency reduces opportunities for bribery; examples: electronic procurement systems in Chile and Korea.\n- Transparency must be paired with dissemination and explanation of data; a free press enhances the benefits of fiscal transparency (example: Brazil audit releases affecting reelection prospects, with stronger effects where local radio stations exist).\n- Citizens’ monitoring platforms (examples: Colombia, Costa Rica, Paraguay) allow oversight of physical and financial progress of investment projects." }, { "heading": "Policy recommendations and lessons for policymakers", "content": "- Tackle high-risk areas first: procurement, revenue administration, and management of natural resources.\n- Strengthen internal controls and build a professional, ethical civil service.\n- Upgrade institutions continuously over many years; political will and perseverance are essential.\n- Keep pace with evolving technology to close new opportunities for wrongdoing (e.g., electronic procurement, information and communication technologies).\n- Promote transparency and support a free press so released data translate into accountability and civic action.\n- International cooperation is crucial: criminalize foreign bribery, crack down on money laundering, and reduce opportunities to hide corrupt proceeds in opaque financial centers." }, { "heading": "Conclusion", "content": "- Curbing corruption is a difficult, long-term endeavor that starts with domestic political will and sustained institutional strengthening.\n- The economic and social gains from reducing corruption can be substantial: higher tax revenues, improved public services, greater trust in government, and better development outcomes.\n\nThe True Cost of Global Corruption – F&D Magazine, PAOLO MAURO, PAULO MEDAS, JEAN MARC FOURNIER, September 2019\n\n---\n\n Content in this bundle\n\n- تكلفة الفساد\n - تكلفة الفساد (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - تكلفة الفساد (PDF){rel=\"external\" type=\"application/pdf\"}\n- El costo de la corrupción ● Finanzas y Desarrollo ● Septiembre de 2019\n - El costo de la corrupción ● Finanzas y Desarrollo ● Septiembre de 2019 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - El costo de la corrupción ● Finanzas y Desarrollo ● Septiembre de 2019 (PDF){rel=\"external\" type=\"application/pdf\"}\n- The True Cost of Global Corruption Mauro\n - The True Cost of Global Corruption Mauro (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - The True Cost of Global Corruption Mauro (PDF){rel=\"external\" type=\"application/pdf\"}\n- Тяжелое бремя коррупции – Финансы и развитие – сентябрь 2019 года\n - Тяжелое бремя коррупции – Финансы и развитие – сентябрь 2019 года (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Тяжелое бремя коррупции – Финансы и развитие – сентябрь 2019 года (PDF){rel=\"external\" type=\"application/pdf\"}\n- The True Cost of Global Corruption – IMF F&D\n - The True Cost of Global Corruption – IMF F&D (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - The True Cost of Global Corruption – IMF F&D (PDF){rel=\"external\" type=\"application/pdf\"}\n- 腐败的代价 - 《金融与发展》2019年9月号·第56卷·第3期 - 国际货币基金组织季刊\n - 腐败的代价 - 《金融与发展》2019年9月号·第56卷·第3期 - 国际货币基金组织季刊 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - 腐败的代价 - 《金融与发展》2019年9月号·第56卷·第3期 - 国际货币基金组织季刊 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2019/09/the-true-cost-of-global-corruption-mauro" } ], "bullets": [ "[Markdown version](/en/publications/fandd/issues/2019/09/the-true-cost-of-global-corruption-mauro/index.md)", "[Structured JSON version](/en/publications/fandd/issues/2019/09/the-true-cost-of-global-corruption-mauro/index.json)", "[Bundle manifest](/en/publications/fandd/issues/2019/09/the-true-cost-of-global-corruption-mauro/bundle-manifest.json)", "Authors: PAOLO MAURO, PAULO MEDAS, JEAN MARC FOURNIER", "Published: September 1, 2019", "Corruption—defined as the abuse of public office for private gain—distorts state activities, reduces economic growth, and lowers quality of life.", "Corruption reduces tax revenue, leads to overpayment for goods and services and investment projects, and distorts spending priorities away from education, health care, and effective infrastructure.", "Examples include Operation Car Wash (Petrobras, Brazil) and past bribery scandals in Japan that helped motivate anti-bribery legislation.", "The least corrupt governments collect 4 percent of GDP more in taxes than those at the same level of economic development with the highest levels of corruption.", "If all countries reduced corruption similarly to recent progress in some places, they could gain $1 trillion in lost tax revenues, or 1.25 percent of global GDP.", "Public procurement accounts for 13 percent of GDP, on average, among members of the Organisation for Economic Co-operation and Development, which represents 36 advanced economies.", "Among low-income countries, the share of the budget dedicated to education and health is one-third lower in more corrupt countries.", "Case study (Georgia): tax revenue jumped from 12 percent to 25 percent of GDP in five years after an aggressive anti-corruption campaign—even as tax rates were lowered.", "Civic attitudes in Georgia changed: the share of people who felt it was never justifiable to cheat jumped from about 50 percent to almost 80 percent.", "More than 40 countries have criminalized payments by their companies to bribe officials abroad.", "Natural resources (especially oil and mining): outsized extraction profits incentivize bribes and state capture; resource-rich countries tend to be more corrupt due to weaker institutions and poor accountability.", "State-owned enterprises (SOEs): management may be susceptible to undue influence, making SOEs in energy, utilities, and transportation less profitable and efficient in more corrupt countries; examples cited include Petrobras (Brazil), Elf Aquitaine (France, before privatization), Eskom and Transnet (South Africa).", "Public procurement and public investment: large sums involved and unique project features make it harder to compare costs and easier to conceal bribes and inflate costs; grand corruption often associated with complex projects such as construction and defense equipment.", "Revenue administration and discretionary tax systems: complex and opaque tax codes increase opportunities for officials to solicit bribes and for legislators to introduce exemptions or loopholes in exchange for payments.", "Distortion of spending priorities drains resources from education, health care, and infrastructure—investments critical to sustainable and inclusive growth.", "Test scores tend to be lower in more corrupt countries despite similar classroom time; teacher hiring and absenteeism can be influenced by bribery or connections.", "In Brazil, where federal transfers for education were partially lost to corruption, dropout rates were higher and test scores worse.", "Improvements in public services (lower crime, fewer power outages) can boost tax compliance and trust in government, reinforcing fiscal gains.", "Success is more likely when countries improve several mutually supporting institutions simultaneously.", "Priority areas to start with: procurement, revenue administration, management of natural resources, and effective internal controls.", "A fiscal governance framework requires a professional and ethical civil service; heads of agencies, ministries, and public enterprises must set a clear tone at the top.", "Investing in information and communication technologies and transparency reduces opportunities for bribery; examples: electronic procurement systems in Chile and Korea.", "Transparency must be paired with dissemination and explanation of data; a free press enhances the benefits of fiscal transparency (example: Brazil audit releases affecting reelection prospects, with stronger effects where local radio stations exist).", "Citizens’ monitoring platforms (examples: Colombia, Costa Rica, Paraguay) allow oversight of physical and financial progress of investment projects.", "Tackle high-risk areas first: procurement, revenue administration, and management of natural resources.", "Strengthen internal controls and build a professional, ethical civil service.", "Upgrade institutions continuously over many years; political will and perseverance are essential.", "Keep pace with evolving technology to close new opportunities for wrongdoing (e.g., electronic procurement, information and communication technologies).", "Promote transparency and support a free press so released data translate into accountability and civic action.", "International cooperation is crucial: criminalize foreign bribery, crack down on money laundering, and reduce opportunities to hide corrupt proceeds in opaque financial centers.", "Curbing corruption is a difficult, long-term endeavor that starts with domestic political will and sustained institutional strengthening.", "The economic and social gains from reducing corruption can be substantial: higher tax revenues, improved public services, greater trust in government, and better development outcomes.", "**تكلفة الفساد**", "**El costo de la corrupción ● Finanzas y Desarrollo ● Septiembre de 2019**", "**The True Cost of Global Corruption Mauro**", "**Тяжелое бремя коррупции – Финансы и развитие – сентябрь 2019 года**", "**The True Cost of Global Corruption – IMF F&D**", "**腐败的代价 - 《金融与发展》2019年9月号·第56卷·第3期 - 国际货币基金组织季刊**" ], "related": [ { "title": "تكلفة الفساد", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2019/september/ar/mauro.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2019/september/ar/mauro.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2019/september/ar/mauro.pdf", "mime": "application/pdf" } }, { "title": "El costo de la corrupción ● Finanzas y Desarrollo ● Septiembre de 2019", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2019/september/es/the-true-cost-of-global-corruption-mauro.pdf", "summary": { "path": 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"https://www.imf.org/-/media/files/publications/fandd/article/2019/september/ru/the-true-cost-of-global-corruption-mauro.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2019/september/ru/the-true-cost-of-global-corruption-mauro.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2019/september/ru/the-true-cost-of-global-corruption-mauro.pdf", "mime": "application/pdf" } }, { "title": "The True Cost of Global Corruption – IMF F&D", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2019/september/the-true-cost-of-global-corruption-mauro.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2019/september/the-true-cost-of-global-corruption-mauro.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2019/september/the-true-cost-of-global-corruption-mauro.pdf", "mime": "application/pdf" } }, { "title": "腐败的代价 - 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