Facts and Costs
UK Tax evasion campaign
A tax evasion campaign has been launched by HMRC as part of the Government’s £917 million investment to tackle tax evasion, avoidance and fraud from 2011-12. This has been added to with a further £77 million over the next two years, which was announced in December’s Autumn Statement. This will aim to raise an additional £7 billion each year by 2014-15 https://www.gov.uk/sortmytax
A review of empirical literature
Abstract: This paper reviews the empirical literature on the economic costs of corruption. Corruption affects economic growth, the level of GDP per capita, investment activity, international trade and price stability negatively. Additionally, it biases the composition of government expenditures. The second part of the paper estimates the effect of corruption on economic growth and GDP per capita as well as on six possible transmission channels. The results of this analysis allows to calculate the total effect of corruption: An increase of corruption by about one index point reduces GDP growth by 0.13 percentage points and GDP per capita by 425 US$.
COSTS of corruption according to World Bank
In 2001/2 the Head of Research at the World Bank, Daniel Kaufmann (nowadays at Brookings Institution) published his observed and calculated total results about corrupt payments in the world as ‘between 600 million and 1,5 trillion dollars’ which is in quotes more and more given as ‘1 trillion per year’. Since that time the World Bank sticks to these figures. They grow slightly (to include inflation?) year after year. Now, the 1 trillion is called a ‘conservative approach’: see World Bank News, -> http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20190295~menuPK:34457~pagePK:34370~piPK:34424~theSitePK:4607,00.html
2. How large is the ‘Global Corruption Industry’, measured in terms of financial amounts per year worldwide?
Corruption is a very large ‘industry’. Yet until very recently, it was virtually impossible to venture an estimate of the extent of corrupt annual transactions. In fact, only a few years ago, corruption was regarded as impossible to measure. Thanks to the ‘explosion’ in measurement approaches and actual data in this field, at least it is now possible to estimate rough orders of magnitude. Our focus is on measuring the extent of bribery from the private sector (firms and individuals) to the public sector.
A conservative approach to such measurement gives an estimate for annual worldwide bribery of about US $1 trillion dollars (US $1,000 billion.). We obtain figures on bribes from worldwide surveys of enterprises, which ask questions about bribes paid for the operations of the firm (licenses, regulations, etc.), as well as bribes paid to get favorable decisions on public procurement. Further, an estimate on bribes paid by household users of public services is derived from governance and anti-corruption diagnostic surveys.
There is a margin of error in all these estimates, so we should regard them as preliminary orders of magnitude. But the main point is that this is not a relatively small phenomena of a few billion dollars – far from it.
3. But can this estimate of bribery be equated with overall corruption worldwide?
A comprehensive estimate of worldwide corruption would exceed the estimate of bribery alone. This estimate of annual worldwide bribery of about US $1 trillion does not include the extent of embezzlement of public funds (from central and local budgets), or from theft (or misuse) of public assets. We do not have an estimate for the worldwide extent of embezzlement in the public sector. Consequently, the above bribery estimate (between firms and the public sector) does not cover every form of corruption (such as embezzlement).
While there are no worldwide estimates of embezzled funds, we do know that it is a very serious issue in many settings. We do know, for instance, that in countries where there is widespread corruption, embezzlement can be a serious problem. For instance, focusing exclusively on the top leadership, Transparency International estimates that Suharto embezzled anywhere between US$ 15-35 billions in Indonesia, while Marcos in the Philippines, Mobutu in Zaire, and Abacha in Nigeria may have embezzled up to US$ 5 billion each.
Furthermore, the $1 trillion estimate does not include the full extent of ’tainted procurement’, but only the bribe fees associated with such procurement. While, for instance, the estimates of bribery exchanging hands for public procurement bids can be estimated in the vicinity of US$200 billion per year, the overall annual volume estimate of the ’tainted’ procurement projects, where such bribes take place, may be close to US$1.5 trillion or so. Finally, there is no attempt to include the extent of fraud within the private sector, but only bribery transactions between the private and public sector.
It should be noted, at the same time, that the $1 trillion worldwide annual bribery estimate does include bribes between firms and public officials or politicians in the industrialized world, and also between multinational corporations from industrial countries bribery to the public sector in emerging economies. It also includes bribery within emerging economies.