In 2005, two officials from the Russian Federal Tax Service and the Central Bank were charged with extorting over $5,000,000 and accepting a $1,000,000 bribe from a Russian bank. While the total amount of the bribe was shocking for many around the world, in Russia people weren’t too surprised to see a $1,000,000 price tag for resolving a tax dispute – rather, many were surprised that the officials were actually caught. What’s even more surprising is that the case has gone to trial today. As I have noted earlier on this blog, INDEM has some interesting stats on prosecution of public officials in corruption cases:
As for prosecution, 3,600 verdicts have been passed on corruption cases and only 507 of them entailed a prison term, INDEM reports. Experts of the foundation therefore concluded that only 1 out of 100,000 corrupt officials go to prison, and chances to fine oneself behind the bards for a bribe taker is 0.0013 percent in Russia.
Russian public officials continue their calls to combat corruption. President Putin has repeatedly stated that corruption is holding the country back, and just recently the Presidential envoy to the southern Russia Dmitry Kozak said that corruption is a bigger problem for investors than terrorism and crime:
“We have already started dialogue with large investor companies, and as practice shows, no one is particularly scared off by terrorist activities or the crime rate, which [by the way] is lower in the south than the national average,” Kozak said. “But what everyone finds really intimidating is the bribes solicited by government officials, as well as [local] authorities’ lack of objectivity and impartiality.”
Although public awareness of corruption has certainly been growing in Russia, effective strategies to combat it are still lacking. One change that businesses would welcome with open arms is regulatory simplification. Opaque, complex, and overlapping regulations that provide much discretionary power to public officials are often the breeding ground for extortion and bribes. Similar arguments often can be applied in the public sector, as citizens often become victims of corrupt behavior by public officials who use complex regulations to their own advantage.
Particular interesting are results of INDEM’s study of public corruption in Russia. INDEM estimates the following break-down of public sectors most prone to corrupt behavior:
#1. Interactions with traffic police (getting a drivers license, passing inspection, etc.)
#2. Job placement or promotion
#3. Registration (getting a passport, etc.)
#4. Services for home renovation/repairs
#5. Education (getting into schools and graduating)
#6. Higher education (same issues on the university level)
#7. Getting free medical care
#8. Getting/enforcing real property rights (housing)
#9. Getting protection from police
#10. Acquire land for dachas, etc.
It is interesting to see how many of the services mentioned in the report are supposed to be provided by the government to people for free. Yet, it seems, people pay for it twice – the first time by paying their share of taxes and the second time by providing a bribe. The most troubling thing in all this is that paying a bribe no longer guarantees the outcome – you may think you are getting a better treatment in the hospital by paying a little extra, but how can you enforce the agreement?
Published Date: January 30, 2007