WASHINGTON: Reducing corruption allows governments to collect more in taxes, according to a study published Thursday by the International Monetary Fund.
The global crisis lender estimates that, among advanced economies, those that best combat graft collect on average 4.5 percent more in tax revenue as a share of GDP than those most beset by corruption.
"The annual cost of bribery alone is over $1.5 trillion, roughly two percent of global GDP," IMF Managing Director Christine Lagarde said Tuesday in remarks previewing next week's spring meetings with the World Bank.
"Money laundering and the financing of terrorism are other serious dimensions of the problem, where the IMF has been working with over 100 countries." Allowing corruption also results in lower public spending on education and health, said the authors of the report released Thursday, noting that this was particularly acute among low-income and emerging economies.
Commonplace corruption is hardest to eradicate, entrapping cities and even countries in pervasive venality, they added. "A public official will be more tempted to accept a bribe when ´everyone´ takes bribes," the report found, noting that the reverse was also true. As instances of corruption grow scarce, the temptation to accept a bribe weakens as officials increasingly fear being caught.
"Thus, escaping the trap of high corruption is difficult," the report's authors say, citing Georgia, Liberia and Rwanda as having made progress over a relatively short period. Georgia had been ranked among the most corrupt nations in the world until 2003. But by 2008 combating graft there had boosted tax revenues to 25 percent of Gross Domestic Product from 12 percent, according to the report.
A year ago, the IMF said it had adopted a new framework to evaluate corruption more systematically among its 189 member countries. In addition to assessing the nature and gravity of corruption and scrutinizing governance, the fund said it would review local government measures meant to prevent bribery and embezzlement.