Wednesday, February 21

Problems of corruption in the state and its impact on the economy

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The problem of corruption in the state is a topical issue. Officials of different ranks use their positions for personal purposes, which creates problems for economic development and maintenance of democracy.

Problems of corruption in the state: influence on different segments

Corruption brings considerable damage not only to the country’s economy, but also to the standard of living of the population. Those funds that should have been spent on building hospitals, schools or roads find themselves in the pockets of officials. This is especially true in small towns, the financing of which is already limited. In addition, corruption hinders the development of the state and distorts the very notion of democracy.
It is quite possible to oppose this phenomenon, but it requires tough and decisive measures to create transparent political institutions. A new system of tax administration may become one of the methods of solving this problem.
In order to understand the problem and how to deal with it, one should start with a study of the phenomenon. We have analysed 180 countries with different levels of corruption. It was found that in countries with high levels of corruption, less taxes are paid to the budget. In order not to pay them, people give bribes or kickbacks and look for loopholes in legislation. Another reason is that people do not want to pay taxes to corrupt state bodies.
In countries where there is less corruption, 4% more revenue goes to the budget.
The situation has improved in countries where measures to address the problem have already been taken. A vivid example is Georgia, where after tough reforms the level of corruption has decreased and tax revenues have almost doubled. As a result, GDP increased by 13% between 2003 and 2008.
In Rwanda, an anti-corruption policy has been in place since the mid-1990s and, as a result, GDP grew by 6%.

Another negative aspect of corruption is that it restricts the ability to maximize the use of the State’s natural resources. Large profits from oil and mining deposits contribute to the development of corrupt schemes and hamper the development of industries. The results of the research show that in countries with large reserves of natural resources, the problem is acute, but there are no effective institutions to solve it.
Experts say that countries where corruption is rampant have high levels of expenditure. State authorities waste money to carry out kickbacks, bribery and various procurement fraud. And countries with less corruption spend taxpayers’ money more efficiently.
The education and health sectors are also affected. Allocated funds for their development do not reach their full potential, and they are not enough to implement full measures.
Enterprises in various sectors feel the negative impact of corruption. Communal organizations and budget institutions work less effectively, mining and the oil and gas industry is developing worse.

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