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Three academics, Heather Marquette, Richard Mallett and Mick Moore, give their thoughts on the Icai report, which said Britain is failing to address corruption in the countries it gives aid to. But what do you think? 
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Dr Lendy Spires: Corruption, Bribery, Tax and Crime, Illicit Financial Flows | Piktochart Infographic Editor
KRII-KROTOASA RESEARCH-INTENSIVE INSTITUTE 's insight:
Governments, academics and tech gurus over the last couple of years have been transfixed with the prospect that better and bigger data can help us solve the world’s more entrenched problems – including corruption and poverty. The United Nations has also caught on to this trend and yesterday released a report, compiled by experts, which endorsed the position that increased, more accessible and better quality data will lead to better policy decisions and greater accountability. The report is supposed to set the scene for how data will be used and integrated into new global sustainable development commitments, which will replace the Millennium Development Goals when they end in 2015. Despite its ambitions, the report still falls short of setting off a real revolution. For this to happen, transparency, accountability and the participation of people must be at the centre. Data, even lots of it, does not equal information. Putting numbers out there that no one can understand and use, let alone find, is not transparency. Just having a data trove does not offer any guarantees that people will be able to hold their leaders to account for their actions, or shape the policies affecting their lives. First it is important to understand what data people want and not just swamp them with information. To do this you need to consult with the people. This is something that the UN data report failed to do, even at the drafting stage. The final report also falls short in outlining the steps needed to ensure that data collection is transparent, accountable and participatory, from the start. Need for open data standards Today when people cannot find the information to monitor budgets or inform policy decisions, it is often because there is no established data sharing framework – legal or voluntary – not because the data doesn’t exist. More open data standards are needed, not just to make data available, but also comparable, accessible and understandable. We are beginning to see what can be done when common data standards are used for development aid and public procurement. When there is a common standard, it makes it possible to move beyond simply answering the question of “how much money was spent” to understanding questions such as “how” and “why” it was spent. It can also help flag instances of abuse, misuse and corruption. We also need to go beyond the UN report’s over emphasis on national statistical offices and official statistics. Citizen-produced data, which is often done in real time, can also give us important snap shots of what is happening on the ground. It can show whether policies and planned spending are working. Putting resources into standardising this information and using common frameworks is what is needed, not just more funding for government statistical offices. Working with citizen-driven data is what Transparency International is trying to do across its movement of 100 chapters world-wide to better prevent, detect and address corruption. What Transparency International has learned from its work is that transparency is the means to an end, not the end point. This is how there will be a real revolution and that is where big data, properly managed, can really help.
EU finance ministers should commit to an immediate review of tax rules to ensure that publicly-listed multinational companies pay their fair share of taxes in every country they operate in. At their meeting in Brussels tomorrow, EU finance ministers should look into tax disclosure rules for European companies also known as country-by-country reporting rules. The EU was due to discuss in 2018 the extension to all sectors of the economy country-by-country reporting rules that are in place for the financial sector, but this discussion should be brought forward in the wake of the latest tax avoidance scandal.
KRII-KROTOASA RESEARCH-INTENSIVE INSTITUTE 's insight:
EU finance ministers should commit to an immediate review of tax rules to ensure that publicly-listed multinational companies pay their fair share of taxes in every country they operate in. At their meeting in Brussels tomorrow, EU finance ministers should look into tax disclosure rules for European companies also known as country-by-country reporting rules. The EU was due to discuss in 2018 the extension to all sectors of the economy country-by-country reporting rules that are in place for the financial sector, but this discussion should be brought forward in the wake of the latest tax avoidance scandal. Leaked documents published today by the International Consortium of Investigative Journalists reveal that 343 companies “have secured secret deals from Luxembourg, allowing many of them to slash their global tax bills” from 2002 to 2010. “We all have a right to know how much tax companies pay to EU governments,” said Carl Dolan, head of Transparency International’s EU office in Brussels. “EU Ministers must now take action to end the secrecy of corporate tax deals in Europe. The Luxleaks deals could not have been kept secret if all companies were required to report details of their tax payments in every country where they operate.” Yesterday Transparency International issued a report showing that the tax deals in Luxembourg may only be the tip of a global tax iceberg. The report showed that the world’s biggest companies disclose little or no financial details about their operations outside their home country. Many of the companies include those alleged to have made deals with the Luxembourg authorities.
The report, Transparency in Corporate Reporting, analysed 124 companies from the Forbes list of the world’s biggest publicly-traded companies. It called for companies to disclose financial data such as tax payments on a country-by-country basis. Country-by-country reporting rules essential Country-by-country reporting is essential to show citizens how much big companies pay their governments, the contribution of companies to their societies and highlight special agreements such as those exposed by the Luxleaks scandal. Several reports have shown that special tax arrangements allow multinational companies to shift their tax burden across borders to reduce their tax bill. Trade-related tax evasion may cost developing countries US$150 billion a year, according to Christian Aid. Tax evasion and tax avoidance are estimated to cost the EU economy 1 trillion per year, according to Tax Justice Network. Oil, gas, mining and logging companies will be obliged to disclose financial data for each country and project from July 2015 under the revised Accounting and Transparency Directives. These regulations require extractive companies to report payments such as taxes to governments on a country-by-country and project-by-project basis. Financial institutions will also have to disclose financial information country-by-country under Capital Requirements Directive IV from January 2015. “Let’s remember that tax deals for multinationals agreed with authorities in one country can have repercussions for other countries who see their tax base eroded. This results in less funds for public services and can exacerbate deficits for countries facing economic crisis,” said Dolan.
Transparency International is the global civil society organisation leading the fight against corruption.
KRII-KROTOASA RESEARCH-INTENSIVE INSTITUTE 's insight:
China is now well into the second year of its aggressive war against corruption. The ruling Communist Party has committed thousands of its members to the cause and put many more behind bars. But as Wang Qishan – a senior leader of the Central Commission for Discipline and Inspection, the agency mandated to tackle corruption – admitted last week, the Party faces severe challenges to change behaviours that have become so much a part of everyday life. From the perspective of an anti-corruption organisation, this is not surprising. Despite the fact that there has been a widespread information campaign to denounce corruption and teach integrity, there is a legitimate concern about how the Communist Party’s war on corruption is being waged. There is a lack of independence of the judiciary, a lack of clarity on what constitutes corruption, and a lack of transparency in the process of prosecuting wrongdoing. Hundreds of people have been arrested for corruption from low-level civil servants to top party officials and big multinationals like GlaxoSmithKline have been prosecuted. It is difficult not to see some of the high-profile arrests as being politically motivated. Too often corruption investigations take place behind closed doors, often in specially designed, padded interrogation centres, and more often than not, those arrested confess. Anti-corruption activists can find themselves the subject of investigation simply for speaking out on asset declarations. Government officials simply disappear from their day jobs when the corruption police show up and never return to work. Suicide rates are on the rise and the number of people fleeing China because of corruption is increasing. This week the authorities announced the confession of one of China’s top generals following a bribery scandal. The greater number of stories in the national and international press about corruption in the past year in China is only likely to increase people’s perception that corruption is rampant, even if the authorities are seen to be tackling it.
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Given the scourge of corruption in South Africa, it is critical that the police reported more detailed statistics on the various crimes that make up the catch-all “commercial crime” category.
Transparency International is the global civil society organisation leading the fight against corruption.
KRII-KROTOASA RESEARCH-INTENSIVE INSTITUTE 's insight:
An open letter published today to the leaders of the Group of 20 biggest economies, five days before the leaders’ summit in Brisbane, Australia, calls for concrete actions to stop corruption and make the global system more transparent. “Lest we forget: the primary victims of organised crime, corruption, and tax evasion or avoidance are the poorest citizens of the world.” The signatories include Nobelists Archbishop Desmond Tutu and Tawakkol Karman plus the heads of the Africa Progress Panel, Amnesty International, Care International, Christian Aid, Global Witness, Oxfam, The One Campaign, Tear Fund, Transparency International and World Vision*. The letter calls on G20 leaders to take concrete steps to stop the more than one trillion dollars of illicit money that is siphoned off each year that could be used to alleviate poverty and better the lives of millions. The G20 must:
This coming together of anti-corruption activists, humanitarian organisations and individuals recognised for the ethical and moral authority, organised by Transparency International, is to show world leaders that there is a common belief across continents and constituencies that specific actions can limit corruption and illegal activities if governments make them a priority. “When a global financial system allows billions of dollars of corrupt or stolen money to flow unchecked around the globe, something is wrong. When financial secrecy helps strip Africa of $50 billion each year, something is wrong. When the poor of this world see the wealth of their countries slip beyond their borders, something must be done.” In the push to deliver growth in the global economy, the signatories are reminding the world leaders that they must put people at the centre of decision-making for sustainable and inclusive development. The initiative coincides with a social media campaign, organised by Transparency International, to send more than two million tweets to the G20 leaders for its Unmask the Corrupt Campaign. The campaign’s three goals are to introduce global beneficial ownership regulations with public registries, use visa denials to punish the corrupt, and make those who sell luxury goods ensure the corrupt don’t profit from the proceeds of corruption.
In the lead up to the G20 meeting in Brisbane, Australia next week the Transparency International movement and its partners in the fight against corruption will send a clear, loud message to G20 leaders to put anti-corruption and money laundering at the top of the G20 agenda. Plans include:1) publishing an open letter to G20 leaders; 2) releasing a collective message on social media that will reach up to 2 million people and 3) holding a press conference in Brisbane.
KRII-KROTOASA RESEARCH-INTENSIVE INSTITUTE 's insight:
In the lead up to the G20 meeting in Brisbane, Australia next week the Transparency International movement and its partners in the fight against corruption will send a clear, loud message to G20 leaders to put anti-corruption and money laundering at the top of the G20 agenda. Plans include:1) publishing an open letter to G20 leaders; 2) releasing a collective message on social media that will reach up to 2 million people and 3) holding a press conference in Brisbane. 1) Open letter to G20 leaders Open letter to G20 leaders An embargoed copy of the letter is available upon request. Please publish in full. 2) Thunderclap launch Also on Monday more than 1000 Twitter and Facebook accounts will send the following Thunderclap message to up to 2 million people around the world: “I’m against secret companies being used to smuggle money for the corrupt. #G20, its time to #UnmaskTheCorrupt http://thndr.it/1owVRls” Thunderclap launch Please donate a Tweet or Facebook post to the Unmask the Corrupt campaign.
Brisbane press conference Please contact Maggie Murphy for details. ### Transparency International is the global civil society organisation leading the fight against corruption.
Transparency International is the global civil society organisation leading the fight against corruption.
KRII-KROTOASA RESEARCH-INTENSIVE INSTITUTE 's insight:
The world’s biggest companies disclose little or no financial details about their operations outside their home country, a new report from Transparency International reveals today. Ninety of the 124 companies assessed do not disclose the taxes they pay in foreign countries, while 54 disclose no information on their revenues in other countries. The report, Transparency in Corporate Reporting, analysed 124 companies from the Forbes list of the world’s biggest publicly-traded companies. The companies, whose combined market value is more than US$14 trillion, are ranked based on their reporting of the measures they take to prevent corruption, information about subsidiaries and holdings, and key financial information about overseas operations. According to these criteria, UK companies are the best performers, Chinese companies the worst. “We need more transparency from multinational companies, whose power in the world economy closely rivals the biggest countries,” said Transparency International Chair, José Ugaz. “With greater economic power comes greater responsibility. Bad corporate behaviour creates the corruption that causes poverty and instability. By not responding to people’s demands for greater transparency and accountability, companies risk harming their brand and losing customers.” Companies not ready for country-by-country reporting rules The report shows that the world’s biggest oil, gas and mining companies are not ready for the kind of transparency rules that will enter into force across the EU from July 2015. These regulations require extractive companies to report payments such as taxes to governments on a country-by-country and project-by-project basis. In the US, Section 1504 of the 2010 Dodd-Frank act includes similar measures, but implementation has been delayed by an oil lobby lawsuit. The respective laws will apply to large companies registered in the EU, and to companies listed on EU or US stock exchanges. Of the 24 extractive companies in the report who would fall under the new EU and US rules, 19 disclose tax payments and revenue in less than half the countries where they operate. Only BHP Billiton, Statoil and Indian firms ONGC and Reliance disclose tax payments in almost all the foreign countries where they operate. “Companies have to provide more information on their financial operations. Transparency allows citizens to find out the extent of a company’s operations in their country. It is also essential to follow money flows between governments and companies, which can be subject to corruption,” said Ugaz. UK companies perform strongly The 13 UK companies in the report performed strongly in reporting on anti-corruption. They all publicly commit to compliance with anti-corruption laws and have whistleblowing measures as well as either codes of conduct or anti-corruption policies applying to all employees. A strong new law prohibiting bribery has been in force since 2011, in response to which many large UK companies have tightened their procedures. A separate report on UK companies’ transparency also published today is available here. All 44 US companies publicly commit to compliance with anti-bribery laws in force since 1977. Four companies (BHP Billiton, Eni, Statoil, Vodafone) score more than six out of ten. The four companies report on a range of corruption prevention measures and disclose details of subsidiaries. However, only three companies, Statoil, Telefónica and Vodafone score above 50 per cent for country-by-country reporting, disclosing tax payments in almost all the countries where they operate, though not all financial data. Chinese companies far behind At the bottom of the ranking, 11 companies scored two out of ten or less, largely because they fail to disclose whether they have the corruption prevention measures common to higher ranking companies. All eight Chinese companies in the report scored less than three out of ten, with six Chinese companies among the bottom 11 companies in the index.
Companies from China were seen as most likely to pay bribes in international business deals by 3000 CEOs surveyed by Transparency International in 2011. Transparency International reiterated its call on China – the world’s biggest trading nation - to join the OECD anti-bribery convention which sets standards for government investigation and prosecution of companies that bribe foreign governments. Tech companies disappoint Forty-four of the firms in the report are American, of which Amazon, Berkshire Hathaway and Google performed worst. Only two US companies publish tax payments in foreign countries (ConocoPhilips in Canada, Walmart in Chile). Surprisingly, the sector that makes greater transparency possible is one of the least transparent. US tech giants Amazon, Apple, Google and IBM all score less than three out of ten. Amazon, Apple and Google are among seven US companies whose company leadership doesn’t publicly demonstrate support for anti-corruption on their web site. Neither Amazon nor Apple say whether they have anti-corruption training for staff. Amazon is the only US company that is silent on its policy on gifts, hospitality and expenses, as well as on the channels it provides for whistleblowers. However, all 44 US companies enable staff to report corruption. “Tech companies are driving changes that are making our societies more open and accountable. They should be setting an example for other companies on transparency. We hope they will live up to the promise of their products and be more transparent about the way they operate,” said Transparency International Managing Director Cobus de Swardt.
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n a report published last week, Britain’s aid watchdog, the Independent Commission for Aid Impact (Icai), accused the Department for International Development (DfID) of failing to address the petty but widespread corruption that blights the daily lives of the world’s poorest people. The report has proved controversial, with some holding it up as proof that UK aid money is funding corruption overseas and others claiming it shows DfID is “setting back the cause of poverty reduction”. But it also raises fundamental questions about the nature of corruption, our ability to tackle it, and its place on a fiercely competitive development agenda, say three experts.
Do we target the servant or the paymaster?British aid money is funding corruption overseas. Billions in British aid “goes to corrupt nations”.
These simplistic headlines have greeted a less than flattering assessment of how DfID approaches corruption in the countries it supports. Here are the headlines I would have written after reading the same report and the response to it:
Frankly, the report from Icai is a mess. It is a wasted opportunity to rethink how we deliver aid with integrity.
Undoubtedly, the aid community’s approach to corruption does need to change – but let’s consider how little the Icai report helps us. It doesn’t actually investigate any standalone anti-corruption projects, and yet it somehow concludes that we need more of these. It provides little credible evidence to back its recommendations. It lambasts DfID for instances of corruption that no external aid agency could possibly control.
British civil servants and DfID’s country-based officers have no power to sanction another country’s police officers when they demand payment for investigating crime, or to intervene when women are deliberately excluded from running for political office. The only sanction DfID has at its disposal is to withdraw all aid – and how does that help the victim of crime or the woman prevented from representing her community?
So if, for instance, public servants are open to bribery because their wages aren’t being paid, do we target the servant or the paymaster? Well, oddly enough, the authors of the Icai report concede that DfID initiatives are already targeting the higher levels of corruption, and doing it rather well.
In Nigeria, for example, the report talks of Justice for All’s success in winning the trust of many in the judiciary and of the DfID-supported State Accountability and Voice Initiative that works with members of Nigeria’s state houses of assembly on transparency and accountability. These are great examples of DfID “thinking and working politically” to support its partners’ domestically driven national initiatives for reform, and Icai says unequivocally that they “provide a firm basis for fostering anti-corruption champions and to start beating back corruption”.
Corruption is fuelled by any source of cash and resources. So all outside actors – including big business and donor governments – have to take a bird’s eye view of corruption and collectively support a coherent strategy.
The research shows that what works best is any support we can give to locally led reform of institutions and political processes and to changing elite attitudes. What we also know is that kneejerk window-dressing projects, like setting up anti-corruption agencies, rarely work when imposed from outside – though they make good headlines. But we’re likely to get more window dressing rather than less as a result of the Icai report.
• Heather Marquette is director of the Developmental Leadership Program and reader in development politics in the international development department, University of Birmingham
Regardless of whether you call it corruption, it worksIn most cases, what we refer to as corruption is the reality of how many political and economic systems work. Patronage-based politics and economics is a resilient form of governance that has persisted for centuries. It refers to a blurring of the lines between private and public, whereby people gain access to economic opportunities or state resources through personal connections with those in positions of relative power. This is not a “third world” characteristic; recent research from Italy, for example, shows that politically connected firms are rewarded with better terms and rates in local credit markets.
What’s more, the term corruption refers to a huge range of issues, which makes the term analytically problematic (to the point of being useless). Yes, much of the time having to pay informal taxes makes it difficult for poor people to make a decent living. But that is just one part of the story.
In many cases, people pay unofficial charges because it makes life easier. Informality is, like corruption itself, considered a roadblock to development or bump in the road towards good governance. But informality creates flexibility and room for manoeuvre in otherwise suffocating bureaucratic systems. Consider the mother in Sierra Leone who needs medicine for her sick daughter: paying a small fee to the staff at her local health clinic might speed up the procurement of drugs, whereas going through the formal and often inefficient channels could put the girl’s life at risk.
Preliminary data from a recent SLRC survey of 1,000 households in Nepal – one of the two countries from which Icai drew primary evidence for its report – show that almost 80% of taxes paid to non-state actors (local groups, religious organisations, trade associations and so on) are reported as being negotiable with the collecting agent. A far lower proportion of state taxes are considered negotiable, but the fact is that it still happens.
Most would consider negotiability of this kind a form of corruption – how can something like tax be flexible? But regardless of whether you call it corruption, it works. There is often a moral economy of taxation, which means that rates can be made to reflect an individual’s circumstances. If a household suffers a major shock (asset loss, job loss), the informality of the system means payments can be negotiated down. Therefore, “corrupt” systems often offer a more viable means of getting by for ordinary people.
DfID will now be under a lot of additional pressure to crack down on corruption. But the approach shouldn’t be to go after the individuals asking for money. It should be on the wider systems that create this. Arguing for a more nuanced understanding of corruption does not mean it’s OK to sweep these problems under the carpet. What it does mean is making sure the right things get targeted.
• Richard Mallett is a researcher with the Secure Livelihoods Research Consortium
Perhaps DfID is better placed to deal with corruption on a global scaleThe report threatens to push British aid policy in the wrong direction. It has received a lot of media coverage, and, like most public discussions in Europe on bribery and corruption in developing countries, the debate has been at times sanctimonious, alarmist, opinionated – and mostly devoid of evidence.
While Icai cannot be held entirely responsible for this media reaction, it did oversimplify the story and the background evidence; and exceeded its own terms of reference by making a strong policy case rather than carefully assessing alternatives. And, perhaps somewhat disingenuously, its report only gives a cursory nod to extensive efforts by DfID – and the UK government more generally – to stamp out corruption at the global level. It looks like an effort to push policy down one particular, narrow, anti-corruption track without a proper appraisal of the evidence.
Given limited resources to tackle endemic and deeply complex issues in the world’s poorest countries – ranging from malaria and Ebola, to bonded child labour, infant malnutrition and sexual abuse of vulnerable women, among many others – should DfID’s anti-corruption portfolio be expanded to “specifically target the everyday corruption experienced by the poor and educate the population about the ill effects of corruption”, as recommended by Icai?
There are two good reasons why DfID should not be panicked into making a policy decision based on this recommendation.
First, there is simply no evidence that DfID has the capacity or the comparative advantage to run such programmes effectively. In ignoring this issue, Icai comes close to contradicting itself. Indeed, it cites research by the U4 Anti-Corruption Resource Centre, funded by DfID, showing “there is little strong or conclusive evidence that the [anti-corruption] interventions that have been pursued have been effective”. If we don’t yet know how to do the job effectively, why pour money into it?
Second, if DfID were to allocate more resources to anti-corruption, why not consider the option that it is better placed to deal with corruption on a global scale – the activities that Icai labels “indirect”? Since Britain is such an important global centre of financial, banking and legal expertise, it is a good place from which to try to stem global corruption.
If the president’s son can no longer park his billions uncounted, unrecorded and untaxed in London, Luxembourg, Zurich or the British Virgin Islands, then he may not charge the chief of police such a high monthly rate for his post, and the police might be under less pressure to squeeze everything they can from each poor person who crosses their path.
The agreed goals of this review were considerably more nuanced, and judiciously written to inform anti-corruption policymaking. Yet, Icai overstepped the mark in the way it has summarised its conclusions, and cannot be said to be behaving entirely responsibly toward the British public and parliament.
Additionally, managing large anti-corruption programmes in low-income countries is now a rather big business. If my taxes are to be spent on this, I would like to be sure the decision was taken on the basis of what works best for those in low-income countries where DfID is working with, rather than a resource-intensive business opportunity.