- What is Corruption Perceptions Index and How it Changes
- Corruption Risks
- Rating of the Most Corrupt Countries of the EU
- Fighting Against Corruption – What Needs to Change
- Examples of Successful Anti-Corruption Campaigns
- Transnational European Financial Anti-Bribery Efforts
- Corruption Markers
According to surveys conducted among residents of European countries, 10% of businesses have encountered corruption schemes over the past year, and up to 80% of Europeans believe that the high level of corruption is a big problem in their region. Opinions are often heard that the elites are profiting at the expense of ordinary citizens. The more points a country or region scores on the Corruption Perceptions Index, the less often people have personally encountered such examples.
What is Corruption Perceptions Index and How it Changes
Corruption Perceptions Index (CPI) from Transparency International is an annual corruption rating for different countries. The list has been drawn up since 1995 and is often taken into account when assessing the living standards in various regions. Thirteen peer review scores from independent companies around the world are collected in the single index list, ranked from 0 to 100 (with 0 being the highest and 100 – the lowest).
It has been proven that in the countries where the rights and freedoms of citizens are respected, the level of CPI is higher, and the standard of living is much better. The CPI is highly dependent on the indicator of freedom of opinion and the opportunity to voice independent judgments. This freedom directly affects corruption risks, as it allows independent media to work freely and make serious investigations of shady transactions. It is the key factor that makes the political establishment strive towards transparency in their work and recognize their responsibility to the general public.
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The CPI level can be used as a framework for characterizing the degree of corruption risks. To do this, maps of corruption and corruption risks are often created, including the following:
- abuse of power;
- preferential right of some over others;
- falsification of data;
- substitution of documents.
Traditionally, working in the south-east of the European region involves high risks, and the further north, the more the indicator decreases. Notable samples with the lowest global risk level are the Scandinavian countries, Great Britain, and Iceland. On the other hand, Italy, Greece, Cyprus, Slovenia, and Croatia are the countries with the greatest corruption risks.
It is important to note that when we speak about the level of corruption in the European Union, we are not really taking about banal bribes or simple collusions; most often it implies cases of much more sophisticated trickery involving extraordinary financial schemes.
The tools used by the participants of such schemes are mostly power play, manipulations with distributing state supplies, including lobbying, financing of certain political groups, concealment of draft regulations, and so on. The shady redistribution of state orders alone amounts to several trillion euros per year.
This is why many ordinary middle-class Europeans often believe that political elites and big business live at their expense, and in many cases, they are not wrong.
Rating of the Most Corrupt Countries of the EU
A few years ago, the top five of the most corrupt EU countries included:
- Romania; and
However, in 2022 the list of the most corrupt countries of the European region looked like this:
The countries with the lowest CPI in Europe included:
- Denmark; and
These countries scored a maximum of 88 points each, while 70% of all the other countries rated for the Corruption Perceptions Index got less than 50 points. So, which country has the highest level of corruption?
In 2019, Lithuania ranked 11th in the rating of the most corrupt European states. Lithuanians themselves complain about the situation becoming worse and worse. Some experts compare the situation in the country with Russia. Punishing officials does not really help so far, failing to improve the general situation in any considerable way.
At the moment, Lithuania is similar to some African countries in terms of the level of corruption, and its citizens consider officials and representatives of the judiciary system to be the biggest bribe-takers. The situation among the military personnel, employees of religious organizations and non-governmental institutions is slightly better. Sadly, there has been an increasing number of corruption scandals in healthcare.
A staggering 95% of citizens of Moldova believe that the level of corruption is “colossal”, with the most problematic social groups being:
- people’s deputies (members of parliament);
- people engaged in the judiciary system;
- government officials;
- medical professionals;
- customs officers;
- the police.
Being asked “What is the main cause of corruption in the country?”, the majority of the Moldovans answered “Poverty.” Moldova has one of the lowest average salary levels. It works like a vicious circle: corruption is generated by poverty, and poverty is multiplied by corrupt officials. Government actions to combat corruption have not yet had any positive effect.
Due to the growth of corruption over the last five years, Ukraine’s index has jumped to 70% compared to the 50% in 2017. In 2006 the country occupied the 99th place (around the middle of the corruption rating), but in 2022 it dropped to the 122nd position. The government has created additional anti-corruption bodies, but their work is seldom more than just a fuss that is supposed to make the impression of hard work, as the only tangible result so far is the increasing number of administrative bodies and bureaucrats in the country instead of any real action. Corrupt links and connections go to the top levels of the power hierarchy.
The level of corruption in Russia is considered quite high. In the poll, Russians named the following groups and agencies among the most corrupt ones:
- security, defense, and law enforcement agencies;
- pro-government structures;
- state bureaucracy.
Experts believe that the malicious social behavior in the country roots in the country’s Soviet past, when nepotism flourished. Having smoothly migrated into the modern power structures, personal connections often decide more than anything else.
The main negative consequences of this situation include the following:
- almost complete disappearance of independent media and the absence of opposition to authorities;
- nepotism and patronage, resolving issues “with a phone call” in the judicial system;
- loyal attitude to what is happening and lack of political activity among the general public.
Russia got only 29 points out of 100, taking the 136th place out of the possible 180. This placed it among many African countries: Mali, Liberia, Angola, and others. Over the past decade, Russia has practically not changed its positions in the corruption rating, which indicates the lack of progress in the anti-corruption efforts.
Fighting Against Corruption – What Needs to Change
Legislative reforms are just the tip of the iceberg in the fight against the spread of corruption. It is necessary to pursue a policy of real persecution of corrupt officials, which would demonstrate the inevitability of punishment for such crimes.
Another threatening signal to the development of civil society is the expulsion and persecution of those whose opinions fundamentally differ from the state agenda.
The absence of publicly broadcasting different opinions about the state of affairs in the country leads to a sharp decrease in the transparency of state structures; information is hidden, and processes gradually fall into degradation. Public figures cease to be and even feel accountable to the general public, which leads to further corruption and contempt of the society’s needs and interests.
Lack of control increases corruption risks due to the fact that a lot of information remains hidden from the public (the officials’ purchases, incomes, and assets, including lucrative property investments). More and more often, public figures choose to operate in the shadows, and their political activity is gradually decreasing or shifting away from the true purposes of state service. The problem of hiding information opens up opportunities for local abuse of power and spread of corruption. The lack of protective legal mechanisms for whistleblowers about facts of corruption becomes a vital deficiency.
Examples of Successful Anti-Corruption Campaigns
Until the middle of the 20th century, Singapore remained a highly corrupt country. In the fight against the high level of corruption, a strategy was developed for several decades ahead with stage-by-stage measures, including:
- simplifying of bureaucratic procedures; and
- introduction of strict codes of ethics for the bureaucracy, accompanied by vigilant control over their implementation.
A central unified autonomous department was created, where citizens could send complaints about cases of corruption. If those cases were confirmed, the applicant received compensation. The judiciary system was updated, and the judges received high salaries, an elite social status, and immunity.
Years later, the country has managed to eradicate corruption, and today it occupies the position in the top of various lists of the best countries in terms of economic freedom and development. Singapore is now among the top-five countries with the lowest Corruption Perceptions Index.
Out of all the successful countries, Finland makes a special example due to the absence of a specific anti-corruption law there. Despite the fact that corruption is a criminal offense there, the punishment can be relatively small: from paying a fine to spending a few years in prison. Instead of tightening the anti-corruption legislation, the Finnish authorities have ratified all international anti-corruption agreements recommended by the UN, the OECD, and the Council of Europe. Today Finland is in the top-3 of European countries with the lowest level of corruption.
Experts note that the success in the fight against corruption was achieved due to the high standard of living of the country’s population: the poverty rate is low (4%), the middle class is quite numerous, and a median difference in the incomes of citizens is relatively small. The society itself is quite homogeneous, with no serious political disagreements within the country.
Until the middle of the 20th century, Sweden had a high level of corruption, but now it is among the top-10 countries with the lowest rate. The Swedish authorities have abandoned the idea of direct state intervention in the matters of private economic entities, focusing instead on regulation tools, such as preferential subsidies and progressive tax.
In what country is it possible to live without paying taxes? In Sweden, on condition that your annual net income is under 50,000 Euros. The richest citizens of the country pay the tax of up to 70%, the middle class – from 20% to 50%, and groups of population with lower incomes actually pay 0% to the budget.
Sweden is a country that has chosen gently “pushing” the citizens in the right direction instead of direct interference in their business. There is free access to all internal state documents, an independent judiciary system, high standards of ethical regulations for officials, and a limit on the salaries of high-ranking civil servants, which must not exceed the average salary in the country by more than 200%.
Transnational European Financial Anti-Bribery Efforts
Corruption is dangerous, because it affects relatively healthy state systems. Realizing how quickly corrupt relations may spread in the international space, the leading countries have made a lot of progress over the past decade in regulating the level of corruption in macro-regions, using the example of the European Union.
Spreading the influence of anti-corruption laws and norms in the international space, in 2020 the EU created a special administrative body to combat corruption and fraud in the field of finance – the European Prosecutor’s Office (EPPO).
23 European countries have participated in the joint work of the department. The main lines of its activity include the following:
- decentralizing prosecutorial power;
- data exchange;
- information cooperation in working against financial schemes;
- conducting investigations;
- making decisions.
The new office is empowered to take over financial offense cases started under national jurisdictions and redirect them to European prosecutors, whose control extends to the entire European Union.
The EPPO structure is supposed to investigate international fraudulent schemes, conduct deoffshorization, and prosecute violators for illegal cash-out transactions and tax evasion.
Based on consulting research, a system of markers has been developed to recognize shady schemes aimed at bypassing legal and regulatory tax barriers. As soon as the country’s departmental regulator detects signs of one or more markers of corruption, this becomes a signal for a more thorough compliance assessment of the counterparty, transaction or payment.
Possible Corruption Markers in a country are as follows:
- an unprofessional (incompetent) company is allowed to participate in the distribution of state resources or assets by permission issued by a pro-government commission;
- people who have previously participated in dubious fraudulent and criminal schemes are allowed to participate in state activities;
- a company that is included in the state distribution activities has a representative of the country’s political establishment among its founders or shareholders;
- the company has a hidden beneficiary related to the country’s politics;
- the country’s civil servants intervene in the distribution of state assets in order to promote the interests of a particular company;
- the beneficiary, who is related to the political process in the country, receives gifts or services from a certain company;
- there is a conflict of interest between various participants of an activity (for example, a construction company and a civil servant of a state construction department or body);
- attempts to intentionally limit the number of bidders;
- including affiliated third parties in order to influence the outcome;
- bypassing the designated bank correspondent account while carrying out some operations;
- a large discrepancy between the terms of the contract and generally accepted market conditions in the country;
- reselling the right to implement the contract to a third party for an impressive reward.
Please contact us now if you are interested in starting a business in one of the European countries or opening a bank account in an EU bank (or perhaps another jurisdiction). Our seasoned experts will try their best to help you make the right choices, observe all the relevant legal and financial regulations, avoid possible pitfalls, and use the existing opportunities for your maximum benefit.
Over the years, it seems that the race between “criminals” and “cops”, in which the former keep coming up with ways to circumvent the rules, while the latter try their best to figure them out, is gradually slowing down. Thus, for example, only in recent decades, numerous barriers to illegal money flow have been developed and implemented at the international level – perhaps, more than over the entire 20th century. To conclude on an optimistic note, over the past centuries, the level of corruption in the world has generally been declining every 50 years.