Shleifer and Vishny (ascited in Claros, 2015, p. 4) define corruption as “the sale by governmentofficials of government property for personal gain”. Due to fear ofinterference in domestic politics, corruption was never put in the spot lightat international institutions such as International Monetary Fund and WorldBank. Hence, each developing state practiced corruption in discreet and as aresult, this has led to the collapse of central planning in developingcountries (Claros, 2015). Corruption practices indeveloping countries has led to the impeachment, and loss of trust byelectorates of several political leaders. For example, in India and Pakistantwo Prime Ministers were defeated after being acquitted of all charges of corruption.In Brazil and Venezuela the heads of state were impeached and dethroned afterthey were found guilty of corruption practices.Thanks to theintroduction of Transparency International (TI) and Corruption Perception Index(CPI) that corruption activities are being closely monitored.
With theintroduction of Transparency International, anticorruption initiatives overseethat public procurement and freedom of information laws are free fromcorruption. The CPI is there to grade the rate of corruption practices in eachcountry using a simple index. However, CPI is disliked by many governments,suggesting that it is effective (Claros, 2015). Corruption corrodes thefoundations of a stable society in the following various ways:Impactson public finances where taxpayers begin to distrustgovernment revenue because the government keeps failing to invest such revenuein productivity-enhancing areas such as education, health, and infrastructure.Foreign aid is also discouraged to assist financially due to fear of enrichingthe “already” rich through corruption practices.Underminingof private sector development. Due to a corruptlybureaucratic system, inflated financial costs, and psychological burdens whichare put in place deliberately to frustrate entrepreneurs, the economic growthof the country is affected negatively because the private sector is discouragedto flourish.
Distortionof incentives. Due to large sums of money that come alongwith large projects, government representatives are tempted to do whatever ittakes to ensure that such projects benefit them and their relatives withoutconsidering the productivity of the investments of such projects.Worsenedincome distribution. With corruption, the rich will get richer,and the poor will drown in a pool of extreme poverty.
Also, because offinancial powers, the wealthy and well connected citizens will use theirconnections to ensure that the tax system works in their favour.Betrayalof trust. Corruption in the society causes the citizens of acountry to question and doubt the credibility of government, thereby resultingin the majority to lose trust in its government.
Once, this trust is broken, itwill be a challenge for the government officials to persuade individuals andbusinesses to continue paying their taxes.