The International Monetary Fund (IMF) believes that there can be big economic awards for governments across the globe if they are able to crack down on corruption in their countries. This comment was made by the IMF following a new analysis by it.
It is possible to increase total tax revenues by $1 trillion, or about 1.25 per cent of total global GDP (gross domestic product) by government being able to reduce corruption, found researchers as mentioned in one of the chapters of the IMF’s April 2019 Fiscal Monitor report which was published on Thursday.
“The gains would be greater considering that lower corruption would raise economic growth, further boosting revenues,” the report added.
With respect to the countries with an advanced economy, governments that had the least corruption were able to collect greater amount of revenue sin taxes – to the tune of 5 per cent of their GDPs, on the average compared to countries where the corruption level was the highest, the IMF report found. For example, there can be additional revenue income for the government to the tune of hundreds of millions of dollars per year for a country of the size of the U.K, the report noted
Corruption has been defined by the IMF as “the abuse of public office for private gain” which can take place in many ways such as through payments of bribes, embezzlement, nepotism and conflicts of interest. While not ranking the most corrupt countries, the Washington based international financial institution chose to explain corruption as a “global problem demanding greater international cooperation to tackle it.”
The IMF believes that because corruption takes place in multiple and varied levels of government and governance, ranging from corrupt practices in tax collection to contract allotment on the basis of bribes for the private and the public sector, it is not always possible to accurately measure the economic costs of corruption. Researching corruption at a global level has been prioritized by the IMF, along with other international organizations like the World Bank and the Organization for Economic Cooperation and Development (OECD). These world bodies also offer guidance and suggestions to governments for reducing corrupt behavioural practices such as bribery and money laundering.
In a survey conducted by the OECD in 2018, researchers found that corrupt acts or other irregular practices in their company within the last three years were reported by 42 per cent of state-owned enterprises. In recent years, the widespread nature of corruption has been highlighted in the investigations of high-profile case such as that of the Petrobras in Brazil and in Malaysia.
In the report, te IMF called on the governments around the world were urged to take a “comprehensive” approach to tackling corruption. That would also require strong “political will”, the report noted.
Some of the important suggestions and recommendations made include clear regulations about tax collection, independent oversight and audits, and strict punishments for corrupt acts. The report also found that corruption can be reduced by allowing the maintenance of freedom of the press and government initiatives to digitize public data.
“Plugging a few holes would simply lead wrongdoers to exploit other vulnerabilities,” the IMF said.
(Adapted from CNBC.com)