Institutions
Question 1
Business bribery has become a global problem to the world economy and efforts to fight it have had numerous obstacles (Adekoya, 2009). Business bribery takes place to enhance business in foreign countries. While this causes an imbalance in business overseas, it also assists businesses to keep up with domestic competition in these foreign countries. Risk assessment is conducted on a regular business to calculate the risk of businesses being asked for bribes in various countries. These issues include whether the official should pay the bribe and if they decide to pay if it should be charged to the company. Another concern by most businesses is if bribes are tax deductible or otherwise. Business officials should refrain from business bribery since it increases the cost of doing business and offers an unfair competitive advantage while overpricing the products for the consumer.
While bribery in foreign countries is prohibited by the US by the FCPA Act, business bribery poses a major dilemma for most business officials. According to the FPA Act, it is a criminal offense for a citizen or a company of the US to directly or indirectly offer or promise valuables to foreign officials for an improper opportunity (DOJ, 2005). This act was first implemented in 1977 after the US government realized that many corporations were losing billions of money to corrupt officials in foreign countries, and tampering with their financial records to conceal these payments. Businesses find this as a cost of doing business since it is the only way to obtain and retain businesses in these countries.
The decision on whether to pay bribes or not is a difficult decision for most companies. Both decisions have a number of outcomes which should be considered before making the decision to bribe or not. The first concern is that uncorrupt companies are left at a competitive disadvantage against the competition. Bribery leads to distorted prices while increasing the cost of conducting businesses overseas (DOJ, 2005). Corporate bribery opens leeways to corruption in other business processes of the company. Corporates end up evading taxes and money laundering to conceal their financial records. Consumers are also disadvantaged by corporate delivery since they are forced to go without the services of the business or acquire them at higher prices.
Since the enactment of the FPA Act, white collar crime has dropped by over 27% with over 40 officials being prosecuted for violating this act. Corruption is illegal in most countries of the world apart from a few countries such as Germany. In Germany, bribery by private practitioners is allowed and hence tax is paid on these bribes. In other countries where bribing is a criminal offense, the country does not expect taxes for non-existent bribes. Since most countries saw the act of corporate bribery as the cost of doing business, most countries came up with favorable terms for deducting taxes which were written off as expenses (Adekoya, 2009). Certain loopholes in the legal tax systems allow for certain countries to make taxes nondeductible. For instance, according to the law, entertainment and gifts are not to be taxed by the government. Other countries disallowed taxation on bribes by making the bribe part of the transaction.
For businesses, corruption causes inefficiency in business practices and leads to inequality. Corporate bribery is associated with other business malpractices such as unfair competition and substandard work. This is especially disturbing since some of these countries engage in sensitive activities such as construction which can endanger the lives of people (Unger, 1998). Even where bribery is accepted, only a few benefit from these sort of business transactions with the majority of the people showing displeasure. These countries are also displeased with the corruption and corporate bribery is considered a problem. It is a violation of ethical business practices, and the reputation of the company is risked in the process.
Question 2
Transparency International conducts a study and releases a list of the world’s most corrupt countries every year. The purpose of this list if to enable corporations to be aware of countries in which corporate bribery is practiced. Violation of the FCPA Act can lead to conviction and a jail sentence. The FCPA is more concerned with the party which pays the bribe even though for a bribe to take place there has to be two parties which are actively involved. There is the one who demands the bribe while the other party is expected to pay the bribe. Most business officials do not look forward to paying a bribe but are forced into the circumstances (Unger, 1998). The government also has limited jurisdiction of officials when these officials are in foreign lands, not forgetting that these business officials conduct businesses with countries which are not as strict as far as bribes are concerned.
The greatest contributing factor to the acceptance of bribes is political interference from top government officials who demand bribes to allow companies from foreign countries to run business factor. The political risk factor is a major factor to consider when accessing risk since it pertains other factors such as political instability. According to the 2016 1st quarter country risk assessment, a number of countries have been mentioned on the front line and various reasons highlighted as to why these countries are considered high risk. Among the leading countries is Armenia, which has been greatly influenced by the recession in Russia. Armenia is experiencing a lot of social anxiety with Protestants and crackdowns being a common scenario (Coface, 2016). The population is in a state of unrest due to the increase in the rates of corruption in the country.
In Japan, government policies have proved ineffective, and the country’s GDP is decreasing steadily (Coface, 2016). The Bank of Japan has also been experiencing a decrease in its funding which is eventually going to have an effect on the country’s economy. Kazakhstan has been adversely affected by the falling prices of oil, and its heavy debt with World Bank. Kuwait and Saudi Arabia are among other countries which are likely to be affected by the falling oil prices (Coface, 2016). Malaysia has foreign debts which are becoming heavier for the country due to a decrease in external demand. The country relies heavily on external demand from countries such as Canada and China. Oman has been experiencing a contraction of its oil exports, a phenomenon which is likely to affect the economy of the country adversely (Coface, 2016). Poverty is termed as the leading contributor of bribery businesses. Most countries allowing bribery are undergoing a series of economic mishaps.
In conclusion, business bribery is a violation of business ethics and should not be allowed. Before the FCPA act, companies were spending billions of their revenue on bribes. Today, most of these companies understand that the violation of the act is a criminal offense which can lead to a jail sentence. Other countries do not recognize bribery as a criminal offense such as Germany, and government officials are expected to pay taxes on these bribes. However, most countries fail to recognize bribes but tax them by rewriting them as part of the business transaction. In other countries, no tax is paid on bribes which are referred to as gifts or entertainment expenses in countries such as Japan. Business officials and companies should refrain from business bribery since it has negative effects on the business and leads to other corrupt activities such as money laundering and tax evasion. The cost of doing business is aggravated and benefits reduced for all the stakeholders involved.
References
Adekoya, O. (2009). To Bribe or not to Bribe: What are the effects of bribery in the success of International Business Transactions. University of Dundee, 1-18.
Coface. (2016). 160 Countries under the magnifying glass. Retrieved from Coface: http://www.coface.com/News-Publications/Publications/Country-risk-assessment-Map-2nd-Quarter-2016
DOJ. (2005). FCPA: A Resource Guide to the U.S Foreign Corrupt Practices Act. FCPA Unit, 1-120.
Unger, S. H. (1998). Etical Aspects of Bribing people in Other Countries. Science and Engineering Ethics, 287-290.
