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How middle-men can undermine anti-corruption reforms

Bjorvatn, Kjetil; Torsvik, Gaute; Tungodden, Bertil
Working paper
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URI
http://hdl.handle.net/11250/162772
Date
2004-12
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  • Discussion papers (SAM) [586]
Abstract
The anti-corruption reform in the Tanzanian tax bureaucracy in

the mid-1990s was apparently a short-lived success. In the wake of

the reform, a number of “tax experts” established themselves in the

market, many of them being laid off tax bureaucrats. We argue that

middle-men can undermine the effect of an anti-corruption reform by

reducing the uncertainty that firms face vis-à-vis a reformed tax bureaucracy,

which in turn may encourage firms to pay bribes rather

than taxes. Indeed, under some circumstances, middle-men can cause

corruption to be higher after the reform than before the reform. Since

the demand for middle-men may increase with the extent of the reform,

we also demonstrate that a small reform may be more efficient in combatting corruption than a more radical reform.
Publisher
Norwegian School of Economics and Business Administration. Department of Economics
Series
Discussion paper
2004:20

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