Financial Corruption in Cyprus: A Growing Concern
Cyprus has been plagued by financial corruption, with a recent Eurobarometer survey revealing that 94% of Cypriots believe corruption is widespread in the country. The Corruption Perceptions Index by Transparency International also shows that Cyprus has become increasingly corrupt over the last decade, ranking 52nd out of 180 countries in 2021.
The Need for Action
In response to these concerns, an Anti-Corruption Authority was established in late 2022 to investigate complaints regarding bribery and corruption. However, experts say that more needs to be done to combat the problem.
The Consequences of Corruption
Economic literature reveals that corruption has a significant negative impact on economic growth, worsening inequalities and corroding culture and society. It hinders economic growth by:
- Reducing domestic and foreign direct investment
- Distorting government spending away from vital sectors like education and healthcare towards less productive areas
Corruption also perpetuates tax evasion and inequality, with the rich and powerful being treated unfairly by the tax authorities while ordinary citizens are subjected to harsher penalties for delayed loan repayments. The huge time lag between submitting income tax returns and processing them by the tax authorities encourages tax evasion, especially among those not subject to automatic tax withholdings.
Combating Corruption
To combat corruption, experts say that strict application of laws and regulations is crucial. This must begin with:
- Action against top leaders
- Greater mobility of civil servants in the public service
- Better supervision of employees
- A focus on attracting moral, high-quality civil servants rather than those with political connections
Reforming domestic institutions, including the judiciary system, tax administration, and Tenders Review Authority, is also essential for an anti-corruption campaign to succeed. Establishing new institutions like a Development Bank that has independence and competent staff could also be key in combating corruption.
A Comprehensive Approach
Leslie G Manison, an economist and financial analyst with experience at the International Monetary Fund and Central Bank of Cyprus, argues that “until the top leaders are held accountable, corruption will continue to plague our country.” He believes that stronger supervision of suspicious bank activities is required and greater mobility of civil servants is necessary to counter corruption at lower levels.
As Cyprus continues to grapple with financial corruption, it is clear that a comprehensive approach is needed to address this growing concern. Only through reforming institutions and taking concrete action against corruption can the country hope to restore public trust and promote economic growth.