MEMES
Corruption tax
For the person in the street, is there much difference between corruption and taxes?
www.transparency.org have just published their ‘corruption league table’ for 2003. It makes interesting, but not very surprising reading.
Finland, apparently, is the least corrupt country. Bangladesh is the most corrupt, and Brazil is about halfway down the list. In some countries corruption is simply a way of life from the most humble worker to the highest official. A colleague once told us that he couldn’t even get out of the airport in Lagos, Nigeria, without a bribe to one of the security staff. If you are unlucky enough to get stopped by traffic police in Russia, they will check your documents, and if there is any irregularity you can expect an on-the-spot ‘fine’, in cash of course, which goes straight into the cop’s pocket. ( having said that, they’ve only just passed laws which require motorists to have insurance anyway ! )
It occurred to us that the government, which pays the cops wages, will be very well aware of what’s going on, and so, will accordingly set their wages lower. In other words, if the traffic-cop-corruption was stamped out, the government would have to put up their wages to compensate. Which would mean that taxes would have to rise to cover the new payments. In a bizarre and twisted way, this kind of low level corruption becomes, for the man in the street, more or less the same as taxation, only, in a sense, more efficient ( no middleman )
Perhaps it would be interesting to try to correlate the Transparency leaguetable with income tax levels in the various countries. In a totally unscientific ad-hoc analysis in which we shamelessly picked the data to match our theory ( just like everyone else does ) - it works. So, the least corrupt country, Finland, has very high personal taxation – up to 48%. ( That’s excluding direct taxation, like purchase tax, VAT, etc. ! ) Brazil, which is in the middle, has rates of around 25%. And Paraguay ( fourth from bottom of the list ) has income tax of 0%.
Of course, this tentative link breaks down at the top end of the corruption scale, where one individual, in a position of exceptional power can demand exorbitant backhanders to rubber-stamp a project. Or when an entire government hands-out multi-billion-dollar infrastructure contracts for companies to which the politicians are linked. Granted, none of the above means there is a causal link between the two factors, maybe there’s not even a casual link, but we think it’s food for thought.
