And here’s how it all started from the tail of Europe…
Article by Andreea Gudin
What we began two weeks ago with an examination of the rule of law in six Balkan countries, following the ECA report – in an article where we noticed the unfortunate similarities between two countries, Serbia and Romania – continues today in a piece intended to reveal a much broader phenomenon with manifestations across the entire continent.
We will explore the framework, opportunities, reasons, semantics, and characters behind grandiose words, institutions with pompous acronyms, and, of course, as in any research involving expressions like “lobby,” “justice,” and “freedom of expression,” we will track the flow of money.
I have always returned to the “manual” in my research. In this case, looking at the disastrous results of the Balkan countries and realizing that Romania, 16 years after accession, faces the same corruption problems, I sought to see the solutions of others, older in the union than us. And so I came across:
EUROPEAN COMMISSION Brussels, 5.7.2023 COM(2023) 800 final ANNEX – 2023 Rule of Law Report Situation of the rule of law in the European Union
This report, issued by the European Commission, contains the facts and recommendations regarding the rule of law for all 27 member countries.
The data is public and can be accessed by anyone. Link to the material at the end. After going through the entire report, three recurring elements remained noted. A kind of “unresolved issues” that continued to stand out in the report, regardless of the country or the “nuance” provided by the authors of the report, for some of the 27 checked. (see the case of Austria in the table below)
The three recurring elements: “political lobbying,” “judicial reform,” “freedom of expression.”
So, 3 out of the six pillars of democracy in all 27 countries, on the ground. We live in pandemic times. Let’s elaborate.
First, let’s start with a “translation” of the intentions to do something about limiting political lobbying in each member country. One by one. Country by country.
|
Country |
IN EU |
LOBBY status |
Short „translation”
|
| Belgium | 67 yrs | · has not made progress regarding the completion of the legislative reform on lobbying activities, including a transparency register and a legislative footprint, which would cover both members of parliament and government officials; | they have no register, no footprint, but this is classified as: “no progress in completing the reform,” as if, by completing only 4 grades instead of 8, you would state when applying to high school that you went to school but did not make progress in completing gymnasium. |
| Germany | 67 yrs | · has made some progress in consolidating existing norms regarding the practice of “revolving doors” by increasing coherence between different applicable norms, transparency of authorisations for the future hiring of high-ranking public officials, and the duration of incompatibility periods for federal ministers and parliamentary state secretaries; | working on norms (consolidation) |
| France | 67 yrs | · has not made progress in ensuring that rules regarding lobbying activities are consistently applied to all relevant actors, including at the level of executive leadership functions; | working on norms (implementation) |
| Italy
|
67 yrs | · has made some progress in adopting comprehensive rules regarding conflicts of interest and in adopting a regulation on lobbying activities to establish an operational registry of lobbying activities, including a legislative footprint; | adopting more norms |
| Luxembourg | 67 yrs | · has made some progress in continuing the implementation and evaluation of new legislation on lobbying activities in parliament, including the transparency register; | implementing legislation and evaluating its implementation |
| The Netherlands | 67 yrs | · has made some progress in completing the revision of rules regarding the practice of “revolving doors” involving former ministers and state secretaries, including a two-year incompatibility period and restrictions on paid activities; | still reviewing norms |
| Denmark | 51 yrs | · has not made progress in introducing rules regarding the practice of “revolving doors” for ministers and lobbying activities and in ensuring proper control of asset declarations submitted by persons entrusted with executive leadership functions; | they have not even started to introduce norms |
| Ireland | 51 yrs | · has made some progress in consolidating the existing ethical framework, including codes of conduct, the practice of “revolving doors,” and asset declarations, especially regarding the monitoring and enforcement capacity of the Commission for Standards in Public Office, and has made significant progress in lobbying activities; | not working on norms, still consolidating what they have |
| Greece | 43 yrs | · has made significant progress in ensuring effective and systematic verification of the accuracy of asset declarations submitted by all types of public officials; | here, they only now admit that there could be “errors” in asset declarations and rigorously verify them because they are surprised by what some people include in their declarations. Far from norms and legislation |
| Spain | 38 yrs | · has made significant progress in continuing efforts to present legislation on lobbying activities, including creating a mandatory public register of persons engaged in lobbying activities; | here too, they contemplate, and progress consists of continuing efforts to present legislation. |
| Portugal | 38 yrs | · has made some progress in ensuring the start of the activity of the transparency entity for monitoring and effectively verifying asset declarations; | they do something else, not what is required. Some progress in ensuring the start of an activity, of a transparency entity… Far from norms, framework, and legislation. |
| Austria | 29 yrs | has not yet made progress in introducing effective rules regarding asset and interest declarations of parliament members, including effective monitoring and sanctioning mechanisms; | the “introverted” child of Europe that needs support with nuanced statements has not yet started to introduce any norms.
|
| Finland | 29 yrs | has made significant progress in continuing efforts to implement the new National Anti-Corruption Strategy and the new Anti-Corruption Action Plan for the period 2021-2023, including initiating the implementation of all planned measures;
|
implementing strategies and plans |
| Sweden | 29 yrs | · has made some progress in evaluating the scope, impact, and implementation of rules regarding the practice of “revolving doors” targeting executive leadership functions within the government; | they are still conducting feasibility studies on the impact of norms, more to come… |
| Cyprus | 20 yrs | · has not made progress in introducing rules regarding asset declaration for elected officials, establishing periodic and comprehensive declaration submission, combined with effective, regular, and complete verifications; | they still need to introduce norms… |
| Estonia | 20 yrs | · has fully implemented the recommendation to continue effective implementation efforts of lobbying activity guidelines; | EU Prodigy KID |
| Latvia | 20 yrs | · has made some progress in continuing efforts to adopt legislative projects regarding lobbying activities and subsequently ensuring the establishment of a special lobbying activities register; | they are still making efforts for legislative progress, but they DO NOT have a lobby register. However, they change the rule! They commit to making it after legislation, and thus, there is no longer an unfulfilled milestone |
| Lithuania | 20 yrs | · has fully implemented the recommendation to begin implementing the anti-corruption agenda for the period 2022-2033; | implementing the plan |
| Malta | 20 yrs | · has not made progress in consolidating norms and mechanisms to improve independent governance; | working on norms |
| Poland | 20 yrs | · has not made progress in consolidating existing integrity norms by introducing lobbying activity norms and a standardized online system for asset declarations of public officials and parliament members; | they have not started to introduce norms |
| Slovakia | 20 yrs | · has not made progress in introducing proposals for the regulation of lobbying activities; | they have not started to introduce norms |
| Slovenia | 20 yrs | · has made some progress in adopting and promptly implementing the anti-corruption strategy; | they are starting to implement the plan |
| Czech Republic | 20 yrs | · has not made progress in consolidating the integrity framework for parliament members, especially by ensuring the existence of codes of ethics for both chambers of parliament; | here, there are no ethical codes either. Far from norms, far from legislation. |
| Hungary | 20 yrs | · has not made progress in adopting comprehensive reforms regarding lobbying activities and the practice of “revolving doors” and has made some progress in consolidating the asset declaration system, ensuring effective oversight and enforcement; | here, progress is limited to careful verification of declarations. Checked. Done with writing nonsense. Reform? Not yet. |
| Bulgaria | 17 yrs | · has made some progress in measures to prevent corruption aimed at improving the integrity of specific sectors of public administration, including the police and the judiciary; | well, Bulgarians are not blind, they have come to think about prevention – with progress in corruption prevention measures… |
| Romania | 17 yrs | · no progress in introducing norms regarding lobbying activities for senators and deputies; | stuck on the shore |
| Croatia | 11 yrs | · has made some progress in introducing comprehensive legislation on lobbying activities, including for persons with executive leadership functions, and in establishing a public register of persons engaged in lobbying activities; | working on intention here too: some progress in introducing legislation. No lobby register yet. |
Considering that the three recurring elements in the annex are lobbying, justice, and freedom of expression, the level of congruence smells more like corruption than foolishness. Only the league differs.
And thus, the natural questions that arise are:
- Applying a simple rule of three to Belgium, for example, a EU member since 1957 and still working on norms after 67 years, how many years do you think will pass before they have something functional?
- Why are the politicians of wealthy Europe as corruptible as those on the periphery?
- Why is there insistence in countries like the founding ones – for over 60 years – not to clearly regulate this lobbying? Is it just because their theft does not hit the average citizen as it happens in our countries? Then who should hold them accountable?
- From whom could the Estonians have learned to do a good job?
- Who stands to gain, and what?
For the first question, I invite you to reflect on it yourself for the moment. Let’s focus, however, on the other questions.
Why are the politicians of wealthy Europe as corruptible as those on the periphery?
What traces does this insistence on non-regulation leave?
Let’s follow the money.
“Investments represent the safest prospect for economic growth. Investments can be made by the business environment (large companies, consortia, multinationals) operating in the country. Investments can also be made through projects funded from the European Union budget. Thus, new jobs are created, sustainable growth is ensured, and positive developments can be anticipated. Investments must be based on the allocation of funds through internal possibilities but also by attracting foreign direct investments.” Prof. Anghel, the work “The Role of Investments and the Business Environment in Economic Development.”
Let’s get back. The “Oberlaa” candies are the investments – EU funds or foreign direct investments (FDI).
So, we have politicians who categorically refuse to regulate lobbying, with a brake squeal on justice and a blow to the mouth of the press, or in the head, depending on the cultural level of the reference country. So, the Oberlaa candies and…? Who is missing between the proverbial Adam and the apple? Eve, the so-called business environment. Let’s call it “the shape shifter” not to raise gender issues with the analogies made.
We know very well what we Romanians do with investments that come through projects funded from the EU budget. Well… we don’t know. We know. Politicians quickly set up companies in the name of relatives, excuse me, the state organises transparent public tenders in which the local business environment… made up of the same names as the entire government composition (… and I start again, reformulate: we are a small nation, pure coincidence), so the prosperous Romanian business environment accesses project after project.
I read a report where Romanian women were ranked 1st in Europe for innovative start-ups. You haven’t seen our business environment as a whole. The way our Romanians, with a social capital of 200 lei and darkness, manage to obtain hundreds of contracts with the state in the first year of operation (divided into small amounts that can be allocated directly because they also have anxieties at the beginning of the journey) and a profit of 6-7 figures in euros would make John Stuart Mill bow his head to the ground.
Let’s go back.
Why are the politicians of wealthy Europe as corruptible as those on the periphery?
Although…
- It seems that you don’t dive in elbow-deep into EU funds like we do;
- Only we have money to reimburse based on stupidly formulated indicators, zero results, highways, and bridges only on paper;
- It would also appear in your GDP.
So, why, you too, Brutus?
Well, only 7 out of 27 countries practically condemn the bribery practices of their companies in other EU countries. Hmm, that’s a start.
Secondly, we, those from the periphery, do not look at tax collection. We have EU funds to grind. So, tax collection… from whom? From multinationals. Well, here in Romania, “The first 350 companies in Romania, with a turnover of over 100 million euros, paid a profit tax of 0.8% of their turnover in 2020, according to Sterică Fudulea, the Secretary-General of the National Council of Small and Medium Private Enterprises in Romania (CNIPMMR), at a conference.”
So who collects from them…? More or less, with an emphasis on more, Luxembourg and the Netherlands. Europe’s new Belizes.
So what do we do, Franz? The latest report from Transparency International says:
“Insufficient accountability efforts. This year, our analysis explores the close connection between corruption and injustice. It’s no wonder that countries where public officials have no chance of being sanctioned for corruption have low scores on the CPI. But top countries have an impunity problem, even if this is not reflected in their scores.
In fact, countries that top the index have a poor track record when it comes to prosecuting companies that pay bribes to win foreign markets, even though they have had the international obligation to do so for over 25 years. This is the case with the Netherlands (ranked 79), where authorities rarely punish companies bribing foreign officials. For example, Dutch authorities have been criticized for choosing not to prosecute Shell in a case of Nigerian oil bribery. Considering the shocking acquittals in Italy in the same case, the Netherlands should seek accountability and reopen the case.”
Speaking of the corruption index in Europe – the operation was a success, the patient is dead. Transparency International also comes with statistics on how the residents of each country perceive the level of corruption of their officials. Except for 3 countries, all of Europe has decreased in the eyes of its citizens. Whether they are countries like Sweden or Finland or some like Romania and Bulgaria, in the last 10 years, all ordinary people have perceived governments as increasingly corrupt.
And here comes May 2023, and the European Commission announces a new anti-corruption strategy: PRESS RELEASE May 3, 2023 Brussels, Anti-Corruption: Stricter rules to combat corruption in the EU and worldwide
Ursula von der Leyen announces a new anti-corruption directive.
“Starting in 2020, the Commission has been monitoring anti-corruption developments at the national level as one of the central pillars of the annual Rule of Law Report cycle. Since 2022, the reports also include recommendations for each country, with the aim of supporting member states in their efforts to promote ongoing or planned reforms, encourage positive developments, and identify areas where improvements may be needed or follow-up on recent changes or reforms. Anti-corruption measures also form part of working with member states in the European Semester and Recovery and Resilience Plans. The European Semester has assessed challenges in the fight against corruption, such as public procurement, integrity in public administration, the business environment, and health sectors. Specific recommendations for each country within the Semester have guided concrete reforms and investments to improve the capacity to fight corruption in several member states. These are reflected in concrete milestones from the National Recovery and Resilience Plans.”
Well, hasn’t the European Commission launched the annual Rule of Law report? The one where all 27 countries stumble in semantics, count norms, and claim that everything is not fine “yet”, regarding lobbying, justice, and freedom of expression? Hmm. And what does this new directive say additionally? Nothing. That we are facing the same problems for which the Commission proposes the same solutions as in the Rule of Law report. But, wait, there is something tangible, don’t be mean. What? Adding an additional 15% tax dedicated to large multinational companies with high profits. Because the Commission also believes that “the shapeshifter” needs to be somehow restrained. They just throw too many taxes on the phantom sources.
Since 2019, the Organisation for Economic Co-operation and Development (OECD) has considered a minimum tax for the profits of multinational companies. In October 2021, 137 countries and jurisdictions agreed to implement a global minimum tax of 15%, through the OECD’s Pillar Two proposal. This agreement was detailed in the OECD’s Model Rules and transposed into a preliminary directive by the European Commission in December 2021.
What’s heard? Did the Americans also try for the first time in history to convince MNCs to change the direction of tax dumping, through the CGCi program? And what happened? Nothing. The share of records in tax havens remained intact. Collection, nothing. But we are Europe. Yes. Economists’ calculations show that “host” countries like Romania will still be left with a swollen lip, never collecting the long-awaited difference.
Let’s take another reference in this direction: the article, “Effects of Global Minimum Tax Revenues under Pillar Two,” Mona Baraké*, Paul-Emmanuel Chouc**, Theresa Neef*** & Gabriel Zucman
“The availability of country-by-country data marks an important step in the analysis of globalization. These are currently the only systematic source on the taxes actually paid by multinational companies in each of the countries where they operate. These data are still in their infancy and suffer from numerous limitations. In particular, in the first reporting years, some profits are double-counted. Profits attributed to ‘stateless entities’ (particularly significant for American multinationals) are often also counted elsewhere (either under the internal profits of the US or in a non-US jurisdiction). This issue is resolved by the complete exclusion of stateless entities. Moreover, the doubling of intra-firm dividends in CbCR statistics can inflate pre-tax profits and artificially reduce effective tax rates since these dividends are generally subject to low or no tax (Horst and Curatolo, 2020). When a multinational from country A owns a subsidiary in country B, which in turn owns a subsidiary in country C, dividends paid by C to B are not considered part of B’s income, yet they are sometimes counted as part of B’s profit. This problem primarily applies to internal observations since intra-firm dividends generally accumulate at the headquarters. There is no systematic way to address this issue at this stage, but internal pre-tax profits are adjusted to exclude intra-firm dividends whenever tax administrations provide relevant information (this is the case for the Netherlands, Sweden, and the United Kingdom).
Ultimately, potential inconsistencies were identified for a few parent-subsidiary pairs indicated by excessive profit margins relative to revenues or large fluctuations in profits between years.
For this reporting, we considered that data provided by multinational companies are ‘available,’ and national tax data for domestic revenues (i.e., revenues that are not internal revenues) are ‘unavailable’ or ‘clearly unavailable.’ We reported separately for each country and, within each country, for each reporting year separately. We combined data reported by all companies and aggregated them at the country and year level, depending on the residence of reporting companies. As mentioned, we consider ‘available’ data to be taken seriously, while ‘unavailable’ ones are critical and require corrections. We considered national data to be available for all countries for the reporting years and adjusted internal data accordingly so that the sums match the revenues and internal rates declared in national tax data. This took place in the case of Germany, France, Italy, Spain, the United Kingdom, the Netherlands, Sweden, Austria, and Denmark. Contrary to an initial understanding, this was not possible in the case of Finland, where no type of data was available for internal revenues or internal rates for 2016-2017 (internal observations for 2016 and 2017 were used instead, and the results obtained were excluded for this year accordingly). Similarly, internal observations for 2017 were excluded. This was also difficult in the case of Luxembourg and Ireland, where only unspecified figures for internal revenues and internal rates were provided, without further information or specifications on how these figures should be interpreted. Therefore, internal observations for 2016 and 2017 were used here as well, and the results obtained were excluded accordingly.”
So, the most corrupt are those who have no data, and the largest drops in the corruption rate have been made by the wealthiest countries. Could that be true?
And the basic question remains, in this case, what are the observations for the Netherlands, Ireland, Luxembourg, and Finland?
That was a point of view on the question of why politicians in wealthy Europe are as corruptible as those on the periphery. When you are corrupt in a wealthy country, the country remains the same; only those around you become richer. So what’s the big deal? We have some clearly defined purposes for EU funds. Each country decides for itself what to do with the money. If they do something wrong, that’s their problem. They need to learn. If 30 years ago I had told the Dutch that their country would become the largest money launderer in Europe, they would have said, “gladly helping nations to escape poverty.”
So, to answer the questions from the beginning:
1st Question: Applying a simple rule of three to Belgium, for example, a EU member since 1957 and still working on norms after 67 years, how many years do you think will pass before they have something functional?
Answer: I would say another 5-6 decades.
2nd Question: Why is there insistence in countries like the founding ones – for over 60 years – not to clearly regulate this lobbying?
Answer: Because you can’t hold a clique of politicians accountable when it is more important to have individual economic stability than democracy.
3rd Question: From whom could the Estonians have learned how to do a good job?
Answer: from the Estonians.
4th Question: Who benefits, and what exactly?
Answer: Who? Those who can convince the business environment that their country is a tax haven and that, in addition, they are EU members, so they are stable and legitimate. What exactly? Money, of course.
So, we have a reform at the European Union level without real impact anytime soon. We have a persistent insistence from 26 countries (including the founding ones) not to clearly regulate lobbying. We have a continuous flow of money to countries that have managed to create the image of a tax haven within the EU. And we have increasingly dissatisfied and skeptical citizens about corruption and the effectiveness of measures taken.
Where do these conclusions take us?
In a Europe at most patchy. Hooray democracy. Hooray rule of law. Don’t know even after 70 years how to find a comprehensive definition of corruption?
Include yourselves, those of you who work in all these European institutions, on the list of officials verifiable for acts of corruption. Take responsibility for the fair regulation of lobbying, and you will be able to assess the consequences.
Otherwise, “we’re all driving Cadillacs in our dreams”.
References used:
- Bridges to Nowhere – State Capture and Corruption Risks in Fiscal Transfers and Public Procurement at the Local Level in Southeast Europe.https://rai-see.org/php_sets/uploads/2023/12/Bridges-to-Nowhere.pdf
- Corruption perception index 2014-2024https://www.transparency.org/en/cpi/2023/index/fin
- lucrarea: Rolul investițiilor și al mediului de afaceri în dezvoltarea economică Conf. univ. dr. Mădălina-Gabriela ANGHEL, Drd. Doina AVRAMhttps://www.revistadestatistica.ro/supliment/wp-content/uploads/2018/10/rrss_10_2018_A3_ro.pdf
- Financial Inteligence – august 2023
- The challenges posed by the European Directive on minimum taxation for enterpriseshttps://www.garrigues.com/en_GB/new/challenges-posed-european-directive-minimum-taxation-enterprises
- https://www.wall-street.ro/articol/Companii/303633/impozit-pentru-multinationale-si-marile-companii-romanesti-deputatii-au-votat-aplicarea-unei-directive-europene.html#gref
- CPI 2023 FOR WESTERN EUROPE & EU: RULE OF LAW AND POLITICAL INTEGRITY THREATS UNDERMINE ACTION AGAINST CORRUPTION
- Top-scoring countries have long fuelled transnational corruption. It’s time they embrace change.
https://www.transparency.org/en/news/cpi-2023-trouble-at-the-top
- Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on combating corruption, replacing Council Framework Decision 2003/568/JHA and the Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union and amending Directive (EU) 2017/1371 of the European Parliament and of the Councilhttps://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2023%3A234%3AFIN
- Bribery to oficialshttps://images.transparencycdn.org/images/2022_Report-Full_Exporting-Corruption_English.pdf
- Revenue Effects of the Global Minimum Tax Under Pillar Two by Mona Baraké*, Paul-Emmanuel Chouc**, Theresa Neef*** & Gabriel Zucman**** https://gabriel-zucman.eu/files/BCNZ2022.pdf
- OECD International Direct Investment Statistics 2022https://www.oecd-ilibrary.org/finance-and-investment/oecd-international-direct-investment-statistics-2022_deedc307-en
- EXPORTING CORRUPTION 2022 Assessing enforcement of the OECD Anti-Bribery Conventionhttps://images.transparencycdn.org/images/2022_Report-Full_Exporting-Corruption_English.pdf
- ANNEX to the COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS 2023 Rule of Law Reporthttps://commission.europa.eu/system/files/2023-07/4_1_52673_comm_recomm_en.pdf
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