New Podcast Episode, Featuring Caryn Peiffer

A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, my Interdisciplinary Corruption Research Network (ICRN) colleague Nils Kobis interviews Caryn Peiffer, a Lecturer in International Public Policy and Governance at the University of Bristol’s School for Policy Studies. After explaining how she became interested in the study of corruption, Dr. Peiffer–drawing on her joint work with Professor Heather Marquette–discusses various theoretical “lenses” for understanding corruption (principal-agent, collective action, and functionality), and how these different approaches to understanding corruption might shed light on different aspects of crafting anticorruption policies. The interview then turns to how to craft effective anticorruption messages and awareness-raising efforts, including how such efforts can go wrong, and how they can go right. Toward the end of the interview, Dr. Peiffer discusses some of her other research on reducing bribery in specific sectors, such as law enforcement and health care. You can also find both this episode and an archive of prior episodes at the following locations: KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

Will China’s Property Tax Reform Be a Catalyst for Corruption?

In China, most residential property owners do not need to pay real estate taxes. In 2011, China initiated property tax trial programs in Shanghai and Chongqing, but even here, the taxes applied only to a few types of properties (newly purchased second homes and high-value properties, respectively) and the tax rates under these trial programs were quite low, and based on a property’s transaction price rather than its current appraised value. But this is about to change. President Xi Jinping’s administration sees a property tax as a key tool to achieve its goal of “common prosperity,” and last October, the government announced a major property tax reform, which is to begin with a five-year pilot program implemented at the local level in selected subnational jurisdictions. Under this reform, most residential property owners will need to pay property taxes, though local governments will have broad discretion to decide on the scope, rates, and collection procedures (see here and here).

Most of the debate about this dramatic change to China’s tax policy have focused on whether the proposed property tax can stop rampant speculation in the housing market and help redistribute wealth. Some commentators, though, have suggested that the new property tax might also help advance President Xi’s anticorruption campaign, because (it is argued) the tax will force greater disclosure of businessmen and government officials’ property ownership. But that hope is misplaced. In fact, the evidence so far suggests that the property tax reform might actually create more opportunities for corruption.

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Guest Post: The Beijing Olympics Marks the End of the Era of Corrupt Authoritarian Megasports—But What Comes Next?

Today’s guest post is from Andy Spalding, a professor at the University of Richmond School of Law and the Chair of the Olympics Compliance Task Force.

The present Beijing Winter Olympics are widely seen as yet another chapter in what has become all-too-familiar story of governance disasters in megasport events like the Olympics and the FIFA World Cup: 2008, China; 2010, South Africa; 2014, Brazil; and Russia; 2016, Brazil . . . again; 2018, Russia . . . again. And now, China . . . again. But for the last decade, pressure has been building for change in how the organizers of these megasport events approach anticorruption and human rights policy. And at last, change has come—even if it’s not yet obvious to casual observers only looking at the current games.

The period between roughly 2014 and 2018 became a tipping point in megasport anti-corruption and human rights policy. Russia consecutively hosted the Sochi Winter Olympics and FIFA Men’s World Cup with dizzying human rights and corruption problems. Meanwhile, the only two bidders for the 2022 Winter Olympics were China and Kazakhstan. Something had to change. Continue reading

Anticorruption Bibliography–February 2022 Update

An updated version of my anticorruption bibliography is available from my faculty webpage. A direct link to the pdf of the full bibliography is here, and a list of the new sources added in this update is here. Additionally, the bibliography is available in more user-friendly, searchable form at Global Integrity’s Anti-Corruption Corpus website. As always, I welcome suggestions for other sources that are not yet included, including any papers GAB readers have written.

“Elect a Government That Works”: A Case Study in Populism and Corruption from India 

As the United States was reeling from President Richard Nixon’s resignation following the Watergate scandal, another imperiled leader—Indian Prime Minister Indira Gandhi—was fighting for her political life thousands of miles away. Although Gandhi and Nixon never got along, their stories overlap. Both barely squeaked into power after close elections in the late 1960s, but then won resounding reelection victories in the early 1970s. Gandhi’s political fortunes, like Nixon’s, took a turn for the worse shortly after reelection, in light of substantiated accusations of illegal campaign activity. But at this point, Nixon and Gandhi’s stories diverge. Unlike Nixon, Gandhi stayed the course and refused to resign. And in the end she prevailed: Gandhi was popularly elected three times with some of the largest governing majorities in Indian history.

How did Gandhi convince the public to reelect her, despite her known, widespread abuses of authority? How did a leader ensnared in scandal and corruption hold onto power to become one of the most beloved leaders in the world’s largest democracy? The answer to these questions may lie in Gandhi’s concentrated emphasis on left-wing populism. She argued to voters that she alone was most capable of effectuating change for India and its most needy citizens by enacting social programs and redistributing wealth. Additionally, Gandhi spent much of her time as Prime Minister consolidating her power within the party and the central government. This enabled much of the corruption that marked her rule but was also what allowed her to argue to the public that she was uniquely capable of fixing the nation’s problems.

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Will the Nigerian Judiciary Stand Up for the Rule of Law and Dismiss the Suraju Case?

The Nigerian judiciary’s commitment to upholding the rule of law faces a decisive test this Monday, February 7. Nigerian prosecutors will present evidence to Federal High Court Justice Binta Nyakothat that anticorruption activist Olanrewaju Suraju should stand trial for violating section 24 of the Cybercrime Act 2015, the cyberstalking provision.

As explained below, the evidence in support of the charges is extraordinarily flimsy. More importantly, section 24 is no longer enforceable in Nigeria. The Community Court of Justice for the Economic Community of West African States, whose decisions bind all Nigerian courts, ruled in 2020 that the cyberstalking section was so vague and open-ended that it violated the freedom of expression provisions of the African Peoples and Human Rights Charter and hence was invalid (here). Justice Nyakothat should therefore immediately dismiss the charges against Suraju.

The only conceivable reason she might not is if she is under “extra-legal” pressure from those who stand to gain from the case being continued.

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Corruption and Trade Misinvoicing: A Closer Look at Colombia

Trade misinvoicing—the misrepresentation of the price, quantity, origin, or quality of traded goods—is a serious problem. Misinvoicing deprives the government of revenue by enabling importers and exporters to evade taxes and duties, or to claim undeserved tax incentives. Consider the case of Colombia: According to estimates, in 2016 the country lost approximately US$2.8 billion in revenue due to trade misinvoicing (equivalent to roughly 5.2% of total Colombian tax revenues collected that year)—revenues that could have paid for Colombia’s 2018-2022 National Development Plan more than eight times over. Trade misinvoicing also plays a key role in so-called trade-based money laundering (TBML), as the under- or over-statement of value of traded goods is one way to move value across borders and disguise the origin of illicit wealth. This form of money laundering is especially attractive to criminals, in part because roughly 80% of global trade transactions do not involve bank financing and as a result are not subject to the anti-money laundering (AML) controls that apply to the financial sector. Myriad TBML cases can be found in countries where corruption is systemic and impunity reigns (see here, here, and here).

Corruption of customs officials is the lubricant that makes trade misinvoicing possible. As one illustrative example of the extent and impact of such corruption, consider the case of Humberto Angulo Montero, the former head of the Cartagena Office of Colombia’s National Directorate of Taxes and Customs (Dirección de Impuestos y Aduanas Nacionales, or DIAN). In 2015, following a nine-year investigation, Angulo was arrested for taking kickbacks from smuggling networks importing alcohol, cigarettes, textiles, and shoes. The investigation revealed that Angulo facilitated the under-reporting of goods by up to 50%, allowing the importers to make colossal profits. In return, the importers gave Angulo a share of those profits—a hefty enough share that his personal wealth increased an astounding 580% between 2003 and 2009. Angulo’s case may be extreme, but it is hardly unique.

Governments in countries like Colombia can and should do more to prevent this sort of corruption. While Colombia took an important step forward in 2015 by passing its Customs Law No. 1762, there is still much room for improvement. Here are four recommendations for making progress on this issue, which are tailored to Colombia but that may apply more broadly:

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All Nations Should Outlaw Tumbling or Mixing Cryptocurrencies

The prosecutions of currency exchanges Helix (here) and Bitcoin Fog (here) show the dark side of virtual currency. As providers of what the Financial Action Task Force terms money or value transfer services, the two accepted a customer’s funds and returned a corresponding sum or product to the customer or third party for a fee.

Helix and Bitcoin both specialized in bitcoin transactions. A customer would buy something on the web and rather than sending the merchant bitcoins directly, the customer sent them through Helix or Bitcoin Fog. That way, the customer did not have to worry about contacting the seller directly, and moreover, if the seller did not accept bitcoins, Helix or Bitcoin Fog would convert the bitcoins into whatever currency the seller accepted.

What caught the U.S. Department of Justice’s eye is that the two exchanges “tumbled” or “mixed” the customer’s bitcoins as part of their service.

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New Podcast, Featuring Torplus Yomnak

A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, I interview Torplus Yomnak (who uses the English name Nick), an assistant professor of economics at the Chulalongkorn University Faculty of Economics in Bangkok, Thailand, as well as the co-founder and chief advisor of the HAND Social Enterprise, a Thai civil society organization focused on anticorruption and good governance issues. He is also one of the recipients of the U.S. State Department’s 2021 “International Anti-Corruption Champions” awards. In our conversation, Nick and I discuss his efforts to combine academic anticorruption research with practical real-world projects, as well as the main corruption challenges and opportunities facing Thailand today. You can also find both this episode and an archive of prior episodes at the following locations:

KickBack is a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.