Evidence of the impact of facilitation payments

Filed under - Private sector

Published on 1 July 2013 as a TI Helpdesk answer
What is the evidence of the damage caused by facilitation payments and what are the most effective counter-arguments to those who wish to allow them?

CONTENT
 

1. Evidence of impact
2. The case for prohibiting facilitation payments
3. References

SUMMARY
 

Facilitation payments typically refer to small bribes paid to public officials by private citizens to speed up bureaucratic processes and access services the payer is lawfully entitled to. Facilitation payments are universally prohibited in the national laws or public service regulations of countries where they are paid, but some countries allow the payment of small bribes to foreign officials to access services.
 

Although some authors have argued that facilitation payments can “grease the wheels” of commerce by reducing transaction costs induced by cumbersome regulations and administrative processes, there is a large body of evidence indicating that such an approach is costly, harmful for firms’ growth and productivity, legally risky and ultimately economically inefficient for companies. Evidence shows that they have a detrimental long term effect on the operations companies, undermine their internal culture and ethical standards, and make them preferential targets for more and greater demands.
 

At the country level, there is also evidence that facilitation payments have a corrosive’ effect on the overall governance environment and the efficiency of the state apparatus, erode the ability of the government to collect revenues from formal tax channels, and ultimately undermine sustainable economic development and the rule of law.

Author(s): Marie Chêne, Transparency International, tihelpdesk@transparency.org
Reviewed by: Robin Hodess, Ph.D., Transparency International; Karen Egger, Transparency International
Publication date: 1 July 2013
Number: 1354

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Country / Territory - International   
Region - Global   
Language(s) - English   
Topic - Politics and government   |   Private sector   |   Public services   
Tags - Bribery   

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