CMLCAR4 Module 6

Customs management and Leadership.

4th Edition MODULE 6 Ethics and integrity in customs administrations

Customs Management and Leadership. 4th Edition.

Author of the course: Inter-American Development Bank Integration and Trade Sector (INT).

Module 6

(IDB)

(www.iadb.org),

through

its

Course Coordinator: Inter-American Development Bank (IDB) (www.iadb.org), through its Integration and Trade Sector, Institute for the Integration of Latin America and the Caribbean (www.iadb.org/en/INTAL), the Institute of Inter-American Economic and Social Development (INDES) (www.indes.org), the World Customs Organization (WCO) (www.wcoomd.org) and the General Secretariat of the Central American Integration System (SG-SICA) (http://www.sica.int/).

Author of the Module: Silvia Liliana Castillo Martinez, Ethics and Integrity Consultant.

Pedagogical and edition coordination: The Inter-American Institute for Economic and Social Development (INDES) (www.indes.org) in collaboration with Fundación Centro de Educación a Distancia para el Desarrollo Económico y Tecnológico (CEDDET) (www.ceddet.org) and Caribbean Customs Law Enforcement Council (CCLEC) (www.cclec.net)

This document cannot be reproduced, in whole or in part, by any electronic or mechanical means, including photocopy or any recording process. Its information cannot be stored or recovered by any systems whatsoever without the due written authorization from the IDB. Any request for partial or total reproduction must be informed to: BIDINDES@iadb.org 4th Edition

These materials have been revised in light of the ministerial decisions taken in the framework of the 9th World Trade Organization Ministerial Conference held in Bali, Indonesia, in December 2013. The adjustments were made in order to reflect a higher alignment between the course topics and the priorities identified in Bali’s Ministerial Declaration and decisions, where all IDB members participated.

Bali Ministerial Declaration and decisions

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Table of Contents

Table of Contents ....................................................................... 3 Index of figures .......................................................................... 6 Index of tables ........................................................................... 7 Index of graphs .......................................................................... 7 Presentation .............................................................................. 8 Aim of the module .................................................................... 10 Learning-oriented questions ....................................................... 10 Unit I. What is ethics ................................................................ 11 Learning Objectives ............................................................... 11 I.1. Concepts ........................................................................ 11 I.2. Different Philosophical Currents ......................................... 14 I.3 Ethics in the Public Administration ...................................... 15 I.4. Ethics in Customs ............................................................ 17 I.5. Strategy to promote ethics and fight corruption under the parameters of the Revised Arusha Convention. .......................... 22 I.6. Code of Ethics ................................................................. 29 Unit Summary .......................................................................... 35 Unit II. What is corruption ......................................................... 37 Learning Objectives ............................................................... 37 II.1. Concepts ....................................................................... 38 II.2. Why is customs more vulnerable to corruption? .................. 44 II.3. Consequences of the lack of ethics in the work place ........... 61 Unit Summary .......................................................................... 66

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Unit III. Professionalism in public management ............................ 69 Learning Objectives ............................................................... 69 III.1. Concepts ...................................................................... 69 III.2 Promotion of ethics in the workplace ................................. 74 Unit Summary .......................................................................... 84 Unit IV. Practice cases............................................................... 86 Learning Objective ................................................................. 86 IV.1. A case study of Cameroon (Thomas Cantens, GaĂŤl Raballand and Samson Bilangna) ........................................................... 86 IV.1.1. Summary ................................................................ 86 IV.1.2. Introduction............................................................. 87 IV.1.3. The impact of computerization ................................... 90 IV.1.4. A turbulent launching in the Port of Douala .................. 91 IV.1.5. Performance contracts, a new step ............................. 96 IV.1.6. The impact of performance contracts .......................... 98 IV.1.7. Conclusions ........................................................... 100 IV.2. Case study of the Tax Administration of Guatemala .......... 102 IV.2.1. Summary Abstract.................................................. 102 IV.2.2. About Guatemala ................................................... 103 IV.2.3. Background ........................................................... 103 IV.2.4. Customs system in Guatemala ................................. 104 IV.2.5. Lack of transparency and results .............................. 105 IV.2.6. In depth solution .................................................... 106 IV.2.7. Results of the SAT .................................................. 107 IV.3. Phases of Institutionalisation of Programmes to Promote Integrity and Fight Corruption ............................................... 113 4

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IV.3.1. Phase I: Internal Efforts to Implement Ethics (1998-2004) ...................................................................................... 113 IV.3.2. Phase II: Rapprochement with the Private sector (2005 and 2006) ........................................................................ 114 IV.3.3. PHASE III: Implementation of International Practices (2007 to date) .................................................................. 115 IV.3.4. Conclusions ........................................................... 119 IV.4. Case of Tanzania. ........................................................ 120 IV.4.1. Conditions Prior to the Establishment of the TRA ........ 120 Unit Summary ........................................................................ 127 Complementary Material.......................................................... 129 Bibliography .......................................................................... 135

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Index of figures

•

Figure No. 1.1. The Two Aspects of Ethics

•

Figure No. 1.2. Guiding Principles for ethical Conduct in Public Service Delivery

•

Figure No. 1.3. Basic Framework of a Strategy to Promote Ethics and Fight Corruption

•

Figure No. 1.4. WCO Revised Arusha Declaration – The 10 Elements

•

Figure No. 1.5. Performance of Public Sector Personnel – Some Important Factors

•

Figure No. 2.1. The WCO Anti-Corruption Pipeline

•

Figure No. 2.2: Factors Giving Rise to Corruption in Customs Administration

•

Figure No. 2.3. Additional Factors Giving Rise to Corruption in Customs Administration

•

Figure No. 2.4. Specific Customs Functions and their Particular Vulnerability to Corruption

•

Figure No. 2.5. SAT: Computerisation as Part of the Overall Process of Modernization and Transparency

•

Figure No. 2.6. Strategies to Reduce Corruption in Customs

•

Figure No. 3.1: Study Findings on Workplace Factors and their Impact on Ethical Behaviour

•

Figure No. 3.2. Process Model for Promoting Ethics, Integrity and Professional Standards. Source: RIPA International

•

Figure No. 3.3. The Institutional Environment of The Guatemala Integrity Pact 6

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Index of tables

•

Table No. 1.1. Progressive Philosophical Thinking on Ethics

Index of graphs

•

Graph 1. Variation of real GDP and cargo tax, 1989-1995 (Percentage)

•

Graph 2. Variation of real GDP and cargo tax, 1996-2006 (Percentage)

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Presentation

Over the past four decades, at both the national and sub-national levels of government, as well as within individual organisations, there has been a growing concern with the issues of ethics, integrity and corruption. All public service organisations would like their staff to work according to a set of professional standards and to exhibit ethical behaviours, behaving in manners beyond reproach. But, to what extent do organisations set out to define the boundaries

of

acceptable behaviours and to establish clear professional standards?

What type of organic structure is developed to underpin such behaviours? What standards and guidelines are being adhered to, and what internal systems are being put in place? What monitoring and control mechanisms exist to assess whether goals and objectives which relate to promoting integrity and fighting corruption have been successfully achieved?

Prior considerations Based upon a concern for explaining the good and evil in the actions of human beings, ethics was born as a question for investigation.

Different schools of ethics were born with the same purpose, and over the course of the years have been reforming everything related to ethics.

Further along, different topics about this important science will be explained, as well as the application of ethics to the daily tasks of customs. This subject has implications for the duty of the customs administration and the quality of its personnel and employees.

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Within this perspective, a factor that provokes a lot of discussion is the subject of corruption. Therefore, we will define the different meanings of corruption and will look for its reasons, because in identifying causes we can correct and improve.

Professionalizing the

personnel of a public administration and

therefore customs personnel will impact the ethical performance of customs functions since bringing scientific and technical concepts together with values make any professional person committed and different.

The international regulations with respect to ethics, transparency and best practices that the majority of countries have adopted to generate common rules to follow in customs tasks are important and quite extensive. Therefore, there will be a description of each of them in the annexes to this document. Finally, there will be a report of two experiences of different countries, where changes have been made in customs administrative procedures, in the personnel and employees employed in those customs administrations, (when reference is made in this document to personnel and employees, it applies to men and women equally; this clarification is made with respect to gender), as well as with other public and private sectors.

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Aim of the module

The objective of the module is to highlight the major issues surrounding ethics, integrity and corruption. Through the use of cases studies and various country examples, the main purpose is to highlight the various ethical dilemmas in public administration, more specifically in the administration of customs, as well as to present solution which can be implemented to ensure good behaviours on the part of public functionaries imbued with public trust and confidence.

Learning-oriented questions

At the end of the course students should be able to respond to a few key questions: •

What are the economic, political and social consequences of corruption?

•

What is the role of professionalization in efforts aimed at promoting integrity and fighting corruption?

•

What

makes

the

administration

of

customs

particularly

vulnerable to corruption? Which areas are more prone to the involvement of functionaries in corrupt practices?

•

What is the role of frameworks, (international) standards, conventions, and guidelines in promoting integrity and fighting corruption?

•

What strategies, systems and initiatives should be implemented within the customs environment in order to ensure ethical behaviours?

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Unit I. What is ethics

Learning Objectives

•

Study the application of ethics to the daily tasks of customs.

I.1. Concepts

As Dr. José Manuel Canales 1 properly points out, public management does not merely imply knowledge, but also techniques or abilities and values. Therefore, it is important that we know some concepts that have been brought forth with respect to the matter, in order to attain desirable, voluntary and internalized behaviors.

To begin with, what do we mean by the term ‘ethics’?

It has been said that ethics is a branch of philosophy that focuses on the study of morality, virtue, duty, happiness and good living. 2 The word ethics comes from Latin ethĭcus, and the latter from ancient Greek ἠθικός or, transcribed to our alphabet, "êthicos". It is 1

Reflexiones sobre la Ética Pública. VII Congreso Internacional del CLAD sobre la Reforma del Estado y

de la Administración Pública, Lisbon, Portugal, 8-11 Oct. 2002.

2

Singer,Peter,Ethics (in English), Ethics,

p1http://search.eb.com.central.ezproxy.cuny.edu:2048/eb/article-9106054, consulted June 15, 2009

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necessary to differentiate the "êthos" that signifies "character” from "ethos" that means "custom," since "ethics" follows the former and not the latter. 3 While some support the equivalence of the two doctrines in regard to what their object is, it is crucial to know that they are based on very different concepts.

Ethics studies what morality is, how a moral system is rationally justified, and how morality has to be applied later to the different fields of personal and social life. In daily life it constitutes reflecting on the moral deed, searching the reasons that justify utilizing one moral system rather than another.

With this definition we hold that ethics has two aspects, one of a scientific nature and another of a rational nature

4,

as illustrated in

Figure No. 1.1:

3

Coromines, Joan. Diccionario crítico etimológico castellano and historia

4

Source: http://www.monografias.com/trabajos6/etic/etic.shtml

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Figure No. 1.1. The Two Aspects of Ethics

The scientific character is based on the

The rational character comes

fact that ethics is a science. Science can

through the use of reason.

predict the behavior of an object because

Ethics is not an experimental

science provides the model under which

science, but a rational one. It

the object acts. It does not "tell" us how

bases its ethical models by

an object behaves but how an object

means of reason, which provides

"should" behave. It utilizes the scientific

us with causes, reasons, the

method. That is the method in charge of

why of the kindness in a deed

corroborating by all possible means the

conduct performed. So it can tell

adequacy of the model with reality. The

us that ethics is concerned with

hypothesis can be proven and at that

providing the reasons why

moment we are dealing with a proven

certain deeds are good, and

model. The scientific character of ethics is

worthy of being done. Ethics

based on the virtue of the fact that this

also argues against bad conduct

discipline presents a paradigm of valuable

such as homicide, drug addiction

conduct that a man should undertake.

deceit, theft, etc.

Source: The Two Aspects of Ethics

The foregoing concepts and arguments leads the reader, for the purpose of this module, to the fact that ethics should be considered a constant discipline for life, since as personnel of a public or private institution, we are obliged to do our daily work with efficiency and efficacy, maintaining an attitude of rejection against anything that minimizes our dignity as human beings. .

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I.2. Different Philosophical Currents

It is possible to distinguish different epochs 5 of the history of ethics, values, morality, virtues and the duty of being part of humanity.

The different philosophical currents show us how the human being has always sought the reason for doing good and bad in the process of his actions.

Categorization can be divided into the four stages

grouping the philosophers, students and more relevant critics.

Table No. 1.1 illustrates the different epochs and progressive philosophical thinking on ethics. Annex I (complementary reading) provides a broader and more detailed explanation of the different stages.

5

Epoch meaning era, or a particular period of time marked by distinctive features, events, etc.

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Table No. 1.1. Progressive Philosophical Thinking on Ethics EPOCHS

•

•

•

•

Ancient

PRINCIPAL PROBLEMS

CENTURIES

PRINCIPAL REPRESENTATIVES

•

6th BC to 5th AD

•

On the structure of • reality.

•

Plato Aristotle

•

5th to 15th

•

The relationship between faith and reason.

St. Augustine St. Thomas

•

16th to 18th

•

The enlightenment • • •

Descartes Hume Kant

•

19th and 20th •

Foundation of the sciences

Hegel Marx Russell Wittgenstein Sartre.

Medieval

Modern

Contemporaneous

• •

• • • • •

Source: Luetich,year

I.3 Ethics in the Public Administration

Oscar Diego Bautista in his essay “La Ética en el Marco de las Administraciones Públicas. Medidas para fomentar la ética en los servidores públicos [Ethics in the framework of Public Administration.

Measures to encourage ethics in public servants]”, states that the principal

corruption

problem

is

unscrupulous

people

who

act

improperly. They lack the minimum of remorse and in any place or situation they behave in the same manner.

Some causes that allow these persons to act fomenting corruption in public administration are:

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1.

Absence of stability in the personnel.

2.

Absence of professional personnel for the exercise of public functions. Those who occupy some positions are not chosen in accordance with the practice of merit-based open competition, in order to find the best person for the job.

3.

Absence of a defined public servant profile.

4.

Absence of a spirit of service.

5.

Absence of ethical principles and values in public servants.

6.

There is a feeling of patrimony in public resources. Public servants on the job take public property as if it were their own. They take advantage of it; enjoy it and even squander, waste and abuse resources and goods in the public domain for the use and enjoyment of their private interests.

The consumer society. For sociologists like Erich Fromm, consumption is a form of possession and perhaps the most important in rich industrial

societies.

Consumption

has

ambiguous

qualities:

It

alleviates anguish, because what the individual consumes cannot be taken away; but it also requires consuming more, because prior consumption soon loses its satisfactory nature. Modern consumers can identify with the following formula: I am = what I have and what I consume.� In that sense Bourdieu, Lipovetsky and Bauman show the change of capitalism to a society of consumption at its different breakpoints, focusing on cultural changes, styles, consumption and consumerism. For the purpose of this work, we can focus on their studies of

the meaning of that social change,

and the effects on

public personnel and employees, since it’s not a case of wanting to possess, but for the others to see what one has. This presents itself as a risk since social pressure can damage those who do not have what others have, and believe that the workplace can be a means for achieving it, although getting it violates established standards.

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I.4. Ethics in Customs

Customs administrations have a gamut of urgent challenges and although the post of customs officer may not be the most ancient profession in the world, it did exist in antiquity. To cite an example, the Bible mentions a customs collector called Zacchaeus who was corrupt; but, happily, he became sick, so that the activity that he engaged in no longer threatened the activity of the other persons (Luke 19:1-10). So the profession has been evolving and today more than ever.

The statement made above introduces us to ethics in customs. As previously indicated, ethics is formed by means of an act of voluntary conscience of man, derived from each person’s moral, social, religious, political or academic formation.

The customs public

functionary, in the majority of legal systems, is a depository of authority, legally responsible for his official conduct, subject to the law and never superior to it 6. Therefore, his exercise implies responsibility for the abuse of power or violation of the law and such violation causes him to incur criminal, civil or administrative responsibility.

6

Constitución Política de la República de Guatemala, artículo 154

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Moreover ethics and, therefore, transparency prevent corruption and help avoid the organization’s objectives being replaced by those of the individuals or bureaucratic cliques. To accept that the employees and personnel of an organization have private interest agendas that that may cause their behavior to deviate from what it should be is an act of realism that has been proposed by Barnard since the decade of the 20s of the 20th century in a book that gave birth to managerial literature. In “The Functions of the Executive,� Barnard recognizes two motivations in employees: personal and collective or communal.

And he resolved the dilemma, at least partially,

referring to the

capacity of executive leadership: In a business it is the responsibility of the upper management to convince the personnel that the objectives of the enterprise are legitimate, socially desirable and should be

shared by all the members of the organization.

Transparency can help guarantee

achievement of organizational

objectives. Also, if the values in the customs administration or any public institution are shared, there will be much fewer violations that merit administrative and judicial sanction.

It is also possible to argue that ethics in customs administration implies

extraordinary

administrative

procedures.

Making

such

procedures transparent reduces the flexibilities of these procedures.

In the long run, however, transparency helps ensure that government agencies are not detoured from their public objectives to serve private interests, for example, the interests of the personnel that manage and work in such agencies.

In that sense, in the functioning of public administration, linking the actions of public personnel to the positions they occupy in customs is of vital importance.

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For all that has been said, there is a formally established and theoretically valid supposition in regard to the public sector: that public servants are “neutral” and “impersonal” in seeking the good of society (Tanzi cited by Lozano). This weighty affirmation makes it appropriate to ask ourselves whether or not public personnel comply with the principle.

What is certain is that these social actors have to face ethical dilemmas or deal with ethics conflicts that originate from two general characteristics of the public function: its representative nature and its institutional character. The first generates conflicts among the principles of action, while that the second generates conflicts among the principles of responsibility (Thompson, 1999).

An interesting aspect of this approach is that it recognizes that public personnel have a double life: as agents of the citizens (they act on behalf of other citizens) and at the same time as their own persons; in both contexts they have rights and obligations. If we of necessity focus on institutions and organisms having a “character” or “habit” of establishing social sense and legitimacy for the activities they undertake, and for the activities of the public personnel who operate within

such institutions, it is worthwhile to cite the U.K.’s Nolan

Report [Standards of Conduct for Public Life]) 7, . The Report focused on ethics and the behavior of the political and bureaucratic class of that country. It established certain fundamental and indispensable principles that should guide the relationship among those agents with regards to the services demanded in public administration.

These principles are illustrated in Figure No. 1.2: Figure No. 1.2. Guiding Principles for ethical Conduct in Public Service Delivery 7

Named after the Chairman of the British Parliament Commission who prepared the document.

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Objectivity: Public servants must carry out their tasks on the basis of the regulatory standards.

Responsibility: Every public servant is responsible for his decisions and actions and must decide and act solely in terms of the public interest.

Rendering of accounts: Public servants must render accounts for the actions and decisions that affect the collective and in addition be disposed to submit them to review and analysis of their actions

Honesty: Public servants are obliged to declare any private interest related to their public responsibilities and they must take necessary measures to resolve conflicts of interest

Transparency, integrity and neutrality: Any social actor who assumes a public position must make decisions based on the public interest

Leadership: Public servants must promote and support those principes by good exampes and leadership

Source: Adapted by the author

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These “principles” or “habits” play an important role in the making of decisions

about public personnel and of the organizations in which

they interact with the citizens, since the decisions do not only have the technical questions as their base, but also involve “values” (professionalism, efficiency, efficacy, the quality of service, attention to the citizen, impartiality and transparency in the procedures, and sensitivity, among other things) that should be drawn on in the face of situations of uncertainty.

Being conscious of the necessity for ethics and transparency that should exist in customs administrations to facilitate the compliance of customs personnel with their obligations, it is necessary to develop, as a minimum, a basic ethics framework strategy as outlined in Figure No. 1.3:

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Figure No. 1.3. Basic Framework of a Strategy to Promote Ethics and Fight Corruption

Strategy to promote ethics and fight corruption •

Contextual background (both national and international). It will be necessary to know the institution’s advances in matters of ethics, for example, if a code of ethics already exists.

•

Evaluation and diagnosis of the situation, to permit demonstration of the institution’s problems in its different areas, for example, if there is no career plan, if there is no internal control unit,

or if

there is a lack of computerized procedures.

•

Proposed strategy (intended to offer solutions to the problems found).

•

The core of the strategy should be a document that contains: o o o o o

Definition.

Objective.

Roles.

Development.

Presentation of solutions.

Source: Unknown

I.5. Strategy to promote ethics and fight corruption under the parameters of the Revised Arusha Convention.

It is important to begin with a workshop in which the participants are a representative group of personnel and employees of the different units that make up the Customs Administration in order to set strategies that would immediately lead:

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(a) to the evaluation of the actions that customs has implemented to promote ethics and fight corruption and then (b) to identify the principal deficiencies and weaknesses in matters of ethics and the areas in which it is most vulnerable.

Those will be the rules to follow for the evaluation, diagnosis and preparation of the Strategy, depending on the model utilized.

However, for the purpose of this document, we will

use as a

reference the ten points of the WCO Revised Arusha Declaration as an example - a very practical base to develop and implement a series of ethics strategies relevant to the environment in which the institution operates. Those elements are listed in Figure No. 1.4: Figure No. 1.4. WCO Revised Arusha Declaration – The 10 Elements

1. Leadership and commitment

6. Auditing and investigation

2. Regulatory framework

7. Code of conduct

3. Transparency

8. Human resources management

4. Computerization

9.

Organizational

morale

and

culture 5. Reform and modernization

10. Private sector relationships

Source: TANU, Dar es Salaam. Arusha Declaration. (1967)

An example of what the strategy presentation should cover would be:

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Definition The proposal of an implementation strategy for the promotion of ethics and the prevention of acts of corruption serves as a central axis, and is oriented to assist in consolidating transparency in the management of the Customs Administration.

Objective The objective of this strategy is long term consolidation of transparency and ethics in customs management through the implementation of solutions designed to strengthen various elements that contribute to building institutional capacity to promote ethics and fight corruption at the tax and customs level.

Roles In order to implement the strategy of promoting ethics and preventing acts of corruption it is important for the personnel and employees (a) to be fully cognizant of the roles they should take in their respective functional areas in order to fulfill their commitments and; (b) to define the people responsible for executing the activities defined in the strategy action plan. The roles to be performed are structured on a descending scale, starting with the maximum authority.

Development The strategy is designed for actions oriented to institutionalize the promotion of ethics and the prevention of acts of corruption at internal and external levels. This strategy responds to the ethics development cycle, which recommends its implementation be constantly evaluated in order to measure the results expected and make adjustments if necessary. This cycle begins with the institution evaluating itself, identifying its problems and possible solutions, developing a plan of action, establishing verifiable performance indicators, obtaining the support of the Upper Management, and implementing an action plan to begin the cycle again.

Below, one of the elements of Arusha is used to illustrate the process of strategy development.

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Thematic Development of the Strategy 1) Leadership and Commitment a. Definition Leadership and commitment dependent upon the level of permanent commitment of the Director and Managers or Chiefs with decision power within the institution to promote ethics, integrity and the fight against corruption. The role assumed by leadership is crucial to the implementation and execution of programs and projects directed to strengthen acceptance by the personnel of a commitment to conduct their actions with ethics and transparency. It is of vital importance that the Director and Managers or Chiefs demonstrate with actions and initiatives their commitment to ethics and integrity. They set the examples to be followed by customs personnel. b. Actual advances In this thematic axis some advances can be mentioned, emphasizing some such as: 1.

Rapprochement

with

the

private

sector,

through

conventions or the signing of an Integrity Pact.

2.

Signing of Technical Cooperation Conventions in Customs matters

with

other

customs

administrations

and

international organisms.

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c. Present situation or weaknesses In accordance with the diagnosis conducted and taking as a base the best international practices for the promotion of ethics, the present problems detected in regard to leadership and commitment in customs could be: 1. Lack of a plan or an integral strategy at the institutional level for the promotion of ethics and integrity.

2. Some

personnel

leadership

role

and in

the

chiefs

have

continual

not

assumed

improvement

a

and

organizational development in themes of ethics with the personnel for whom they are responsible.

3. Lack of a shared level of responsibility among the members the same work team.

4. Not all functional areas actively assume their role or their responsibility in the implementation of initiatives to promote ethics. d. Presentation of solutions or challenges 1. Formalize the commitment of customs to implement the strategy

by way of a document signed by the Director of

Customs involving upper level personnel in the process of implementing the strategy.

2. Modify, revise and/or update procedures, internal standards and

organizational

structure

to

contribute

to

the

implementation of the strategy.

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3. Develop methodologies of integration that promote the relationship between functionaries and the personnel for whom they are responsible for the review and effective comprehension of procedures and processes oriented to encourage organizational development to obtain the best results.

4. Strengthen the level of responsibility shared by the members of work teams by means of formal, written commitments for individual and team performance in achieving the objectives assigned.

5. Develop an effective internal communication strategy with the support of all dependencies that involves informing all personnel of the strategy to promote ethics and integrity.

As set forth in the foregoing example each one of the Model’s items is developed in order to then identify those responsible in each one of the points charged with following up on the implementation, as well as reporting to the director on the process.

In that context the WCO has fixed as an objective the preparation of a global strategy and program for the purpose of promoting customs ethics. The WCO strategy and program in matter of ethics have progressed in logical phases : •

In phase 1: a strategy of great breadth is developed to address the subject of customs ethics. This work led to the adoption of the Arusha Declaration in 1993.

•

In phase 2 an institutional mechanism is developed (creation of an Ethics Work Group) and support instruments (Guide for Self Evaluation of Integrity and Code of Conduct Model), as well as the Integrity Action Plan.

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In its present phase, the WCO’s works on ethics are characterized by consolidation, integration and the promotion of its instruments and initiatives.

Figure No. 1.5 highlights some of the factors critical to effective performance of public sector personnel.

Figure No. 1.5. Performance of Public Sector Personnel – Some Important Factors

There are some important elements or factors in the performance of public personnel, these being: a) Technical and personal capacity of public personnel; the professionalization of personnel is therefore necessary, as well as the development of schools to train personnel for the public function (recent years have seen an important boom). b) The remuneration of these personnel should be in accordance with the requirements of the post and the responsibility delegated to them, leaving aside differences of culture, gender, origin,

race,

age

or

physical

condition

in

establishing

remuneration. For example, men and women with functions that require equal ability, effort and responsibility should be assured of receiving the same remuneration. c) Other factors intervene as well, such as approvals and promotion. These should be based on technical and efficiency criteria, leaving aside politics, culture, gender, race, origin and other considerations not connected to effort, performance or quality of work.

Source: Unknown

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I.6. Code of Ethics

A Code of Ethics

provides assistance in administrative systems for

fighting or neutralizing the surge and diffusion of corruption.

However, it is appropriate to emphasize that even when there is a Code, it is not a panacea. It is vitally important to coordinate and continually discuss the code with the personnel in such a manner that there is essentially a technical and political identification with the rules of the management of the public function.

From the perspective of public service ethics, the action of personnel should be: adequate, directed to attaining the objectives established by the institution, and mindful of the need for rendering accounts.

There should exist a sense of solidarity, as well as a focus on maintaining relationships of cooperation with the citizens

and with

the different social actors who participate in the social, economic, political and cultural context 8.

There are different models of the Code of Ethics, for example, the WCO Model Code of Conduct, which contemplates eleven key elements of a code of conduct for customs personnel, being: a.

Personal responsibility.

b.

Compliance with the law.

c.

Relations with the public.

d.

Acceptance of gifts, prizes, hospitality and discounts.

e.

Avoidance of conflicts of interests.

8 Construcción de eticidad en funcionarios de la administración pública [Building ethical behavior in personnel of the public administration]. Egleé Vargas Acosta* Marisela Árraga Barrios**

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f.

Political Activities.

g.

Conduct in questions of money.

h.

Confidentiality and the use of official information.

i.

Use of official property and services.

j.

Private purchases on the part of personnel of government

property. k.

Scope of work.

The WCO Model Code of Ethics and Conduct provides for disciplinary actions for the more serious violations committed by customs personnel. Thus it says: “All the customs personnel should comply with the law. The special responsibilities of customs mean that violations related to legislation that applies to customs, or in which customs has a special interest, are more serious when committed by customs

personnel.

Customs

personnel

who

commit

violations

specifically linked to prohibited drugs, fraud, seeking or accepting bribes or the illegal importation or exportation of merchandise shall

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be subjected to disciplinary actions, independent of penalties that result from criminal procedures.”

As also suggested by the WCO Revised Arusha Declaration, the disciplinary measures and the sanctions in case of illegal or unethical behavior on the part of personnel should be in proportion to the seriousness of the violations. 9 Other examples of the Code of Ethics are the following:

•

Guatemala: its object is to create ethical standards that aid in the

development

Superintendency

of of

an

Tax

organizational Administration

culture to

reject

in

the

corrupt

practices. It refers to conduct and sanctions.

•

Panamá: has a uniform Code of Ethics for Public Servants who work in Central Government entities.

•

Ecuador: its Code contains a basic outline aimed at promoting correct professional performance by each one of the members of Internal Revenue Service (Ecuador separated its internal tax functions and customs; until recently this Administration was autonomous and integrated both tax areas).

•

Korea: it is a broad document and includes not just the part related to the activities but sanctions as well.

•

Canada: this Code was restructured because it referred to conduct and did not impose sanctions, since sanctions were established in a specific standard of the institution. (Also, the Administration of customs and Internal Tax is separate.)

9 http://www.wcoomd.org. Seleccione la pestaña Customs Topics (Temas aduaneros), later Customs Modernization and Integrity (Modernización e integridad aduaneras) and finally WCO Integrity Program (Programa de integridad de la OMA)

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However, we must be conscious that the task of designing a system that encourages the integrity of customs administration requires not just an effort to adopt the necessary measures against corruption, but also an ongoing control that guarantees that the measures continue to operate in the manner in which they were intended.

When we speak of controls we can cite as an example that the strategy implemented should be reevaluated at least every two years, since in the long run over time many of the solutions proposed in the strategy should have been implemented. Even countries whose administrations are considered the most efficient and honest continue to exert considerable efforts to guarantee that the controls continue to work, and they constantly make evaluations at the institutional level, which range from intranet or internet internal questionnaires to selected interviews.

This takes us to another important point that applies to all public personnel and the private sector as well, with regard to the ethics of work. In this regard, it is necessary that we begin by defining work, which different authors agree is something that shapes us as persons and allows us to enjoy life.

According to Peinado Navarro 10, the profession is an activity of man that performs a social function. All persons who exercise a profession have to have the idea of remaining in it for a long time, seeking in it the means of sustaining life and expecting that that profession or work be lasting. The situation in many customs administrations is different, because the idea is too often disseminated that a job in the customs administration is an opportunity to work for a short time and get rich quickly instead of being considered a professional long-term career.

10

Source: www.slideshare.net/.../etica-professional-7540263

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A customs post is a fiscally constituted public office generally established on coasts and frontiers. Its objective is to register international traffic in merchandise imported and exported from a specific country and charge the taxes that customs establishes.

For example, if I as a customs officer have a family member or friend who needs to be attended, I should seek another officer to attend him, since otherwise it could be interpreted as a favor.

However, sometimes that may not be possible, in such case I must get or have gotten the authorization of my chief and then comply with the regular procedures.

Another obligation of customs personnel and of any public functionary is to inform management of any illegal act or violation of work related rules, committed by the functionary himself or by someone else ( a functionary cannot hide or pretend he does not see a lack of proper conduct or approve such type of behavior). This act, commonly referred to as ‘whistle blowing’, involves giving information, usually to the authorities, about illegal or underhand practices (including coverups), but could also be to an independent structure associated with the organization, or to the media.

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For information, which provides a useful guide on ‘Blowing the Whistle’, you can view the following video clips: http://www.youtube.com/watch?v=4wKbiqmgVeA

That leads us to conclude that all persons who find they performing a public function are complying with a social function on behalf of the government. In providing a service, the public officer has the obligation of acting in conformity with the law in a framework of honesty, transparency and integrity due to his/her position of trust and public confidence. The

customs functionary or employee,

therefore, should be an ethical professional responsible to the Law, the Community and the entity in which he works. Nicholas Henry defines ethics of the public function as the “conjunction of values that provides those in public institutions to manage with the notions that let them serve the public interest and not their personal benefit.” 11 Ethical standards and behaviors are intimately related to culture and the history of the countries, which can exercise great influence on the efforts made to adopt measures such as those described. Remember that all the examples we have of good practices in other countries, or documents for the adoption of strategies to implement ethics and transparency in customs should serve only as a base. The country that wants to adopt such strategies and practices will adapt them to its

idiosyncrasies,

exactly

as

has

happened

in

countries

like

Guatemala and Costa Rica. Other countries have taken into account the documents and procedures for the implementation of a strategy of ethics from the World Customs Organization and from Canada.

11

Public Administration and Public Affairs. 7ª Edición. NJ: Prentice Hall. 1998

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However, strategies are not the same, because each country has adapted the strategies to its necessities and to what was viable in accordance with its legislation.

Unit Summary

This chapter addresses ethics, how it rationally justifies a moral system and how it should be later applied to the different fields of personal and social life. Ethics has two aspects, one scientific in nature and the other rational, both of which lead us to the conclusion that ethics should be considered as a constant discipline for life, since it obliges us to undertake our daily tasks with efficiency and efficacy, maintaining an attitude of rejection to everything that minimizes our dignity as human beings and as the personnel of a public or private institution.

Ethics has different philosophical currents, these being Ancient, Medieval,

Modern

and

Contemporary.

Also

discussed

is

the

relationship of ethics in Public Administrations, where it is obvious that the principal corruption problems are persons without scruples who act improperly, not only in the professional environment but in the personal sphere as well. Special emphasis is given to ethics in customs administrations because there is a wide range of challenges with respect to the day-to-day functions carried out by customs personnel. It is also possible to argue that ethics in customs administrations

imply

extraordinary

administrative

steps,

which

reduces the variability of these processes, thereby making the procedures more transparent. In that sense, linking the action of public personnel with the posts they hold in Customs are of vital importance.

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These social actors have to deal with ethical conflicts that originate in two general characteristics of the public function: its representative nature and its institutional character. The first generates conflicts among the principles of action, while the second generates conflicts among the principles of responsibility, according to Dennis Thompson.

Special mention was made of the strategy for promoting ethics and fighting corruption, which should involve developing and exemplifying a strategy which relates to the Arusha Declaration. The Declaration advocates a plan of integrity for customs which should include ten elements that approach such aspects as technical and professional capacity for the public function, the remuneration that should be in accordance with the requirements of the job and the responsibility delegated to them, also in relation to the evaluations and promotions leaving aside political considerations.

From this Declaration flows the WCO’s Code of Ethics and Conduct, which provided disciplinary actions for more serious violations committed by customs personnel. However, it should be kept in mind that the task of designing a system that encourages the integrity of the customs administration is not just an effort for the adoption of the measures necessary against corruption, but also ongoing control that guarantees that the measures continue to serve the purpose for which they were adopted.

The foregoing leads us to determine that all persons who find themselves performing a post in the public function perform a social function on behalf of the government. In providing the service, they have the obligation of acting in conformity with the law within a framework of honesty, transparency and integrity since they are entrusted with public confidence. They are required to display at all times ethics, not only in their work but also in their personal attitudes as well.

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Unit II. What is corruption

Learning Objectives

•

State the role of standards, frameworks and conventions in promoting ethics and fighting corruption

•

State the economic, political and social consequences of corruption

•

Identify

at

least

three

(3)

main

functions

in

Customs

administration more prone to corrupt practices and a few strategies for safeguarding integrity and fighting corruption in these three areas.

Beginning

with

our

examination

of

concepts,

what

do

you

understand by the term ‘corruption’?

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II.1. Concepts

Corruption (from Latin corruptĭo, corruptiōnis; at the same time from the intensity prefix com- and rumpere, romper) is the action and effect

of

corrupting

(depraving,

throwing

away,

suborning

someone, perverting, damaging). The concept, according to the dictionary of the Spanish Royal Academy (RAE), is utilized to name the vice or abuse in a document or in non-material things.

For the focus of this reading material we can consider that the more illustrative response is that of Vito Tanzi (1995): “Corruption is the intentional failure to comply with the principle of impartiality with the proposal of deriving personal benefit or benefits for related persons from such type of behavior.”

In order to effect a more profound analysis it is necessary to establish what the elements of corruption are and with the support of Boris Begovic, 12 we can find three basic elements that are described below: The first refers to intentional failure to comply with the principle of impartiality, in the sense that it is required that personal relations or relations of another type not play any role whatsoever in economic decisions that involve more than one party. Equality of treatment for all economic agents is essential to the good functioning of the market economy. Preference toward some economic agents definitively violates the principle of impartiality and implies a condition necessary for corruption. Without preference, there is no corruption.

12

Corrupción: conceptos, tipos, causas y consecuencias. programa de actividades entre el Centro para la Apertura y el Desarrollo de América Latina (CADAL) y el Center for Liberal-Democratic Studies (CLDS), que cuenta con el apoyo del Center for International Private Enterprise (CIPE) [Corruption: concepts, types, causes and consequences. program of activities between the Center for Opening and Development of Latin America (CADAL) and the Center for Liberal-Democratic Studies (CLDS), which has the support of the Center for International Private Enterprise (CIPE)]

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The notion that conceives of corruption as a way to receive money is known to all (this form of corruption is generally called bribery), but something similar can be implied by costly gifts or other favors.

Presenting expensive jewels to the spouse of the person who violated the principle of impartiality and gave your son a well-remunerated job (with little work) is definitely corruption.

To receive some benefit or obtain some advantage can take place simultaneously while violating the principle of impartiality; but those actions can also take place at different times.

That is to say, the preferential behavior of the corrupt person involves an informal, but sometimes connecting obligation of the other party to return or pay for the favor, and that obligation has no expiration because the corrupt person can obtain his benefits in the future. If the favor to exchange is a well-paid job for a son, and the son has just entered the university, it is obvious that there is a time space between the two acts that can lengthen compliance with a favor.

The concept of corruption has evolved to such a degree that it has come to take into account the elements and considerations that the different

Anti-corruption

Conventions

have

contributed.

It

is

worthwhile to emphasize that, while it is true that the Inter-American Convention Against corruption (CICC), does not define the concept of corruption, it does enunciate conduct that can be considered acts of corruption.

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For a discussion on various forms of corrupt behaviour you can view the following videoclip which interviews Frank Vogl, renowned author of the bestseller ‘Waging War on Corruption’: http://www.youtube.com/watch?v=Cii1FRHFB8w

In that context, it is important to point out that anti-corruption conventions

offering

an

international

juridical

framework

to

governments and citizens are of vital importance in that they can be taken as references for beginning initiatives setting out to strengthen government institutions and abate the problem of corruption.

Additionally, they serve as a base for collaborating with other countries. The conventions in effect in the Americas include the OAS Convention, the UN Convention, as well as the OECD Convention and the UN Convention against Transnational Organized Crime.

All

these

conventions

are

manifestations

of

an

international

consensus that emerged in the beginning of the 1990s identifying corruption as an important problem that required solutions of an international

order.

The

catalyst

for

such

concerns

was

new

opportunities being presented for corruption, as a result of worldwide privatization and increasing deregulation initiatives.

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Some investigators also point out that the reduction of commercial barriers in the 1980s and 1990s, in order to increase access to markets

and

competition

among

multinational

enterprises,

incidentally increased corruption in various important sectors. In that context, the international anti-corruption agenda was given an additional impetus by the discontent of multinationals headquartered in the U.S.A. These entities believed that, for some time, they had been in a disadvantageous position on the global market due to the United States 1977 Foreign Corrupt Practices Act that sanctioned transnational bribery with criminal penalties. As a consequence, the United

States

government

became

the

principal

promoter

of

initiatives to find a solution by means of an international regime that would limit transnational bribery.

Of the international conventions drafted during the last decade, the OAS Convention was the first adopted, after numerous scandals of corruption in the hemisphere. Signed in 1996, the Convention, in the context of the first Summit of the Americas, has led to efforts designed to approach the problem at the regional level with a treaty that focused on fighting corruption.

The UN Convention signed at the end of 2003, is the most recent anti-corruption instrument. Building on the OECD regional initiatives, it offers the comprehensive and global focus necessary.

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The obligatory questions are: what are these Conventions, and what is their primary purpose? To that, we will say that they are binding accords

celebrated

among

various

countries

through

written

agreements that bring together regulations and standards commonly agreed to by the Parties, as evidence of the Parties’ high degree of political commitment. Their adoption by government assemblies, as well as the UN General Assembly or the regional assemblies, seals the international consensus in regard to the themes advanced. This consensus gathers more force when an appreciable number of governments who are members of those assemblies sign the conventions. They acquire legal character when a predetermined number of countries ratify them. Anti-corruption conventions include standards and requirements to prevent, detect, investigate and sanction corrupt acts. Some conventions are quite wide in scope; others are less extensive and cover a limited number of countries or measures.

Some conventions, including the OAS and UN conventions, contain as many

obligatory

provisions 13

–as

non-obligatory

or

optional

provisions 14. In general, the optional provisions are accepted as good practices; but in some cases, their introduction into the national juridical order has been obstructed by legal aspects particular to each country.

The

anti-corruption

measures

contemplated

in

the

conventions can be implemented by means of laws, regulations, policies and practices.

13 14

These provisions legally bind the ratifying states and others.

These are provisions which may or may not be respected.

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Anti-corruption conventions are of essential importance in the creation of a framework for approaching transnational themes since they facilitate international cooperation in: the application of the law, requiring the countries to penalize corruption; harmonizing the legal and institutional frameworks for the application of the law and; establishing collaboration mechanisms. Additionally, they serve to establish, in distinct measures, common standards for the domestic institutions, policies, procedures and practices that support anticorruption initiatives in the national arena. The fact that anticorruption conventions exist is testimony that the international community takes this problem seriously and reaffirms the necessity of finding common solutions. The standards and requirements that these treaties set for the governments have considerable weight, given the international backing of the conventions, and they will become

more

advantageous

in

view

of

the

changes

facing

governments.

Through the conventions, then, internal and public pressure (among equals) can be exercised on the governments so that they comply with the standards and requirements set. The conventions serve as the tools of the citizens and civil society organisations to require a rendering of accounts from their governments with respect to its performance in the anti-corruption area. They serve as forums for the governments concepts

to

and

deliberate analyzing

on

corruption

anti-corruption

themes,

harmonizing

initiatives

of

non-

governmental actors.

A successful strategy of the struggle against corruption should, in addition,

consider

the

environment

in

which

the

customs

administration develops and the customs system that is applied. The promotion of ethical values in its personnel and employees has a capital importance in corruption prevention and combat.

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In a manner complementary to the strengthening of integrity by means of the training process, it is necessary to establish a system of internal controls of management and auditing procedures, especially in the customs operational phases considered critical, as well as in the development of mechanisms for the rendering of accounts to society.

One cannot speak of an efficient system for fighting corruption and illegalities if it is not part of an overall internal proposal for functioning adequate to cover the phases of prevention, detection and sanction of corrupt and illegal conduct within the customs administration. In this manner, the establishment of transparency systems minimizes the risks inherent in customs procedures and creates conditions for efficacious and healthy functioning.

II.2. Why is customs more vulnerable to corruption?

Corruption and customs are two words that have always been linked.

The idea appears to be rooted in the conscience of our society that the first of those words was the genus and the second the species.

This linkage is unjust. People who have transited through customs areas know that yesterday, today and always there were, are and will be professional and technical people who have demonstrated their rejection of acts of corruption with valor and professionalism, even at risk of threats to their physical being or their families.

It is desirable for persons who have been assigned to customs functions, whether in the public arena or the private, to be of professional and technical caliber. This statement is based on the expectation that those who specialize in customs matter will be less susceptible to ceding to the temptation to break the law.

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However, this is not an unbroken rule, because there are numerous examples, in various customs administrations around the world, of customs

professionals

and

technical

people

who

have

taken

advantage of different administrative positions to obtain what has been called “easy money.”

It is necessary to review what we consider the causes of corruption.

The factors that can create conditions for engaging in corrupt practices must be analyzed.

Robert Klitgaard (1988) proposed a useful analytical framework to analyse corruption. Klitgaard suggests that corruption is most likely to occur: (a)

when agents (individuals or groups) enjoy monopoly power over clients;

(b)

when

agents

enjoy

discretionary

power

over

the

provision of goods or services; and (c)

when the level of accountability is low.

According to the framework, the probability of corruption occurring follows a simple equation: Corruption = Monopoly + Discretion –Accountability (C = M + D - A) McLinden (2005) argues that this framework has particular relevance for the customs environment where, due to an administrative monopoly, customs administrations are often the only agency with responsibility for certain administrative and regulatory functions; where customs officials, at even relatively junior levels, enjoy considerable

decision

making

power,

and

discharge

important

administrative functions; and where the level of supervision and accountability is often poor. The author notes that Klitgaard’s formula 45

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has been influential in shaping the direction of the anti-corruption efforts in several countries and has been used extensively in the development of the WCO’s Revised Arusha Declaration on Integrity in Customs, as well as in a range of the WCO’s integrity-related tools.

Corruption in the heart of a customs administration is manifested through external factors or internal conditions. The predisposition of the functionary to commit such acts, the opportunities presented to him and his evaluation of the risk of being detected and sanctioned, taken together, can produce corruption.

The external component can be manifested, among other causes, by the diversity of standards, the differentiated duties or the discretion allowed in applying the procedures. Those factors can lead to avoidance on the part of those obliged to pay and the proliferation of attempts to corrupt the administration for the purpose of reducing tax

payments

and

compliance

with

customs

standards

and

procedures. In reference to internal behavior, not only corruption, but the illegal acts committed, present widely different pictures in regard to the subjects involved and degree of their implication, transcending in many cases the relationship between the taxpayer or customs user and the customs functionary. In this sense, the measures applied in the fight against these phenomena in its preventive, educative, investigation, detection and correction effort should address the universe of persons involved.

In considering various measures or efforts, the WCO advocates the use of an anti-corruption pipeline as a framework to consider specific types of activities to promote integrity, as illustrated in Figure No. 2.1.

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Customs Management and Leadership. 4th Edition.

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Figure No. 2.1.The WCO Anti-Corruption Pipeline

Source: The World Customs Organization: Integrity Development Guide

Prevention involves ensuring that the right conditions are present to avoid eventual wrongdoings and corruption; whilst deterrence focuses on outlining clear consequences for acts of wrongdoing and corruption. Detection, on the other hand, involves establishing mechanisms to identify acts of wrongdoing and corruption.

Opportunely designed instruments or proper utilization of resources should permit connection in a virtuous circle of preventive actions, along

with

those

of

detection

and

correction.

Fundamentally,

detection and correction are utilized to eradicate impunity toward violations of the standards of integrity and even the commission of crimes, while the preventive actions are oriented to resolve the deficiencies and institutional faults that make corruption possible.

Some ethical and moral evocations of this problem arise when a society is losing its values, such as responsibility, honesty and honor, spirit of service, tolerance and others.

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But the phenomena also develop as an abuse of power and decision making; while the lack of institutional and social controls permit it, and citizen organization and participation is little or none.

In that order of ideas there are some factors that can lead to a lack of integrity

influencing

the

development

of

corrupt

customs

administration practices. Some we can highlight are illustrated in Figure No. 2.2 below:

Figure No. 2.2: Factors Giving Rise to Corruption in Customs Administration

Strong State intervention in the economy

Cultural standards and practices that influence the behavior of personnel

Insufficient rendering of accounts

Excessive discretional powers for Customs personnel

Lack of supervision and orientation (lack of controls that ensure performance of duties in an honest manner)

Inadequate control systems, no attention paid to the application of systems that make it difficult for personnel to engage in corrupt practices

Lack of efficacious disciplinary measures. Sanctions are an important dissuasive factor in the struggle against corruption

Source: Unknown

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Customs Management and Leadership. 4th Edition.

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Figure No. 2.3 illustrates other causes that might lead to corruption in the customs: Figure No. 2.3. Additional Factors Giving Rise to Corruption in Customs Administration

1

• Low salaries / lack of employees / poor employees

2

• Lack of moral / Christian and civic principles

3

• Lack of formation of values in the family /school

Source: Unknown

The following provides additional concrete examples of factors which can give rise to corrupt behaviours: Customs is more vulnerable to corruption when: •

It has an inadequate and bureaucratic organization, operating poorly and served by numerous personnel.

•

The personnel lack professionalization, are badly paid and have a high immorality index (the idea is too often disseminated that a job in the customs administration is an opportunity to work for a short time and get rich quick, instead of being considered as a long term career profession).

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Customs Management and Leadership. 4th Edition.

•

Module 6

A dispersed number of standards of different range exists (frequently the information that permits importers and exporters to determine their obligations and to voluntarily comply with the law is not divulged. Without that information, importers and exporters operating in an environment of complex rules can be obliged to consult a functionary or ask him/her to exercise his powers of discretion).

•

There is a lack of coherence and systemization in customs operating procedures that encourage the existence of excessive and largely inefficacious controls. Instead of simplifying voluntary compliance, use is made of a multiplicity of formulas and procedures that must be processed at least by a series of personnel,

which

can

create

situations

that

motivate

illicit

payments or charging commissions for accelerating procedures.

•

Within the administration itself there is an extreme lack of access to information on work that has been done. This frequently occurs as a result of loss of institutional memory (knowledgeable customs functionaries exit the organization without proper knowledge management systems being in place and effectively put to use).

•

Inadequate recruiting, selection and promotion of personnel occurs because there is no administrative career system to guarantee labor stability in many customs administrations.

•

Lack of incentives in the face of challenges and responsibilities assigned. Monetary incentives are usually not applied. There should be recognition of the employee of the month, as well as training that professionalizes the functionary).

•

Configuration of “perverse” incentives and, in many countries, the existence of cultural standards of tolerance and acceptance of corruption.

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Customs Management and Leadership. 4th Edition.

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Lack of investment in the customs administration and lack of State level support for the development of the customs administration, the result of which is a poor working environment and work conditions.

Whilst the above foregoing provides a more general overview of the situation, McLinden (2005) is more specific in pinpointing those functions within the Customs administration which he argues are more vulnerable to corruption. Figure 2.4 illustrates.

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Figure No. 2.4. Specific Customs Functions and their Particular Vulnerability to Corruption

Source: McLinden (2005:69)

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We must remember that customs is interrelated to the actions of different public institutions and absorbs the lack of prestige that corruption provokes in other public services linked to the exterior traffic of persons and merchandise and even to corruption in its socalled “auxiliaries.� That other corruption is quite superior and enormously more damaging than what is nested in the customs administration itself. In this respect, infinity of reprehensible actions executed by police, health, agriculture, migration, port and airport personnel (among others) is at work. This other corruption has attained a colossal dimension by virtue of document (and not cargo) control and failure of superiors to fully exercise the authority that the Law confers.

Seen in this light, a commitment to combat deep-seated corruption obliges attention not only to its more evident manifestations, but also to its causes. That requires designing actions to be developed under an integral vision that articulates the utilization of diverse resources such as information technologies, electronic media, intelligence systems, reliability proofs and specialized techniques in accordance with the specific result sought. At the same time, this focus guarantees greater impact of the actions developed and better utilization of employee resources.

Some actions tending to slow corruption constitute: •

The existence of clear and simple legislation, which creates the framework procedures,

for not

establishing only

for

easy-to-understand entrepreneurs

systems

engaged

in

and

foreign

commerce but for customs personnel as well. This should allow the importers to be able to comprehend the law and comply with procedural guides in the majority of transactions with the customs administration. Customs personnel should have a limited margin of maneuver to exercise their discretion.

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Customs Management and Leadership. 4th Edition.

(a)

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An efficacious sanctioning system that empowers the

imposition of administrative sanctions. It is also important for the judicial system to facilitate penal sanctions in the case of contraband. (This will depend on appropriate legislation in each country). (b)

Clear legislation is certainly necessary. It is equally necessary

for the customs administration to have a simple system with simple procedures, easy to understand rapidly, which allow reducing the costs of compliance for importers and exporters, and reduce

opportunities

administration.

System

for

corruption

and

and

procedures

the

can

costs

be

a

of self-

determination process for taxes and how to transmit and present the merchandise declaration to customs, defining information and documentation necessities, attempting to reduce administrative requirements that the importers and exporters must comply with to the minimum; coherence in interpretations of the law, as well as the procedures, so that they are in harmony and all transactions receive uniform treatment. (c) Use of computer support to process merchandise declarations and other information that the importers, exporters and auxiliaries need to present to customs. This requires putting in place uniform procedures into practice that eliminate, to a large degree, the need for face to face contact and opportunities for personnel to exercise discretion, particularly if the importer has the possibility of presenting information electronically. This situation already occurs in different customs administrations. However, in some it is not the totality of information, for example, as in Guatemala where support documents are not presented electronically.

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Implementing modernization and transparency in customs has three fundamental components and one is the computerization of procedures, as presented in the following Figure No. 2.5. The whole idea is to unite the procedures and technology with persons and standards.

Figure No. 2.5. SAT: Computerization as Part of the Overall Process of Modernization and Transparency

Source: Own preparation in function of Process of Customs Modernization of Guatemala

•

Optimizing professionalization in customs is the best way to monitor customs system equity and neutrality. This makes it possible to have an administrative professional: who renders accounts in light of performance, whose attributes are clearly defined, who assists in improving his own efficacy and is capable of confronting the problems of corruption. The foregoing requires a review of the following elements:

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A) Professional management. It is singularly important that customs supervisors and administrators be capable and have specialized knowledge, which is not always the case.

B) Remunerations and working conditions that allow customs personnel to have salaries sufficient to minimise incentives to act in a corrupt manner. Although public administration remunerations will never be able to attain levels that eliminate all corruption (there are numerous cases of well-paid customs personnel in developed countries who have accepted large sums of money for permitting a cargo of drugs to cross the frontier), salaries can be fixed that offer a reasonable standard of living and eliminate the necessity of having to accept "commissions". Perhaps it is not always possible to increase salaries, so some countries have adopted salary scales and special incentives for personnel or bonuses that depend on the amount of taxes collected, or performance prizes for the quality of attention afforded the taxpayer and the capacity to adapt to change. It is equally important to establish an environment in which working conditions are appropriate, conditions that include

having

an

adequate

work

space,

equipment

(telephones, computers, transportation, etc.) and supplies. The authorities should not depend on importers, exporters or their agents to provide them with installations or equipment, because that could be interpreted to be in exchange for favors C) Personnel rotation does not imply a form of preventing corruption for most; for others, however, it is of great importance to reduce opportunities for collusion.

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In Guatemala there is an institutional rotation policy in customs that has given good results. Prior to this policy, numerous entries of specific merchandise in specific customs posts were detected and after rotating all the personnel, curiously the imports were substantially reduced. Of course that can also produce the transfer of a focus of corruption. It is therefore important for the personnel to all be rotated to different customs posts so that it won’t be the same personnel in a different customs post.

D) Additionally,

personnel

and,

supervisors

as

well,

should

vacations

to

reduce

the

above be

all,

the

obliged

possibilities

to of

chiefs

annual

take not

and

detecting

excessively tight relationships. Provisional chiefs should be named

to

take

over

the

functions,

this

allows

crossed

supervision so that it can be seen whether chiefs and supervisors are involved in acts of corruption.

E) As

already

mentioned,

training

is

essential

for

the

development of customs administration professional. Training should

be

arranged

based

on

detailed

analyses

of

the

organization’s necessities and personnel available, to guarantee that the training is adjusted to the necessities. It should also be parallel to the encouragement of team spirit and leadership, generating awareness that personnel should be responsible and loyal to the institution, complying with the mission/vision and promoting integrity.

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As an example we can mention that some countries constantly concentrate on training in customs matters. In their initial induction programmes they include aspects of ethics and the institution’s values. It is important for such training to be ongoing.

F) The promotion of posts within the customs administration should be based on merit, which makes it necessary to establish a clearly defined professional path (administrative career) and a policy that allows the functionary to feel that if he makes an effort in the performance of his duties he will have an opportunity

to

advance,

and

conversely,

that

acting

inappropriately can result in a loss of opportunity and in serious cases, dismissal. It is important that customs personnel know what the administration expects from them and how not meeting their obligations can lead to administrative sanctions and, depending on the gravity of the offense, before the corresponding judicial organ.

G) The existence of a Code of Conduct, which derives from the foregoing comments, reinforces each of the elements that encourage the ethical attitude of customs employees and personnel. It is important that not only the employees, but the importers and exporters know the conduct expected of both parties.

By

establishing

clear

expectations

the

customs

administration can require customs employees and personnel to render accounts by their performance and take appropriate measures when they fail to measure up or to comply. For the existence of a code of conduct to be efficacious, it should describe the disciplinary measures that will be taken when unacceptable acts are discovered. Said measures should be 58

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taken regularly and coherently, establishing acceptable rules of conduct.

In Guatemala, the Code of Ethics remits sanctions to the provisions of the Internal Work Regulations so that there is no duplicity in sanctioning standards.

However, in other countries their standards allow the Code of Ethics to contain sanctions, because, as has been mentioned throughout this document, there is no unique formula. Each country’s culture and internal standards should be taken into account to implement the best instrument in accordance with its idiosyncrasy or, as some say, write your own rules.

(H) One aspect that is very important and should not be ignored is auditing, which permits verification that customs personnel and employees actually comply with operating procedures based on clearly defined procedures. Such procedures are generally described in procedural manuals or guides, with an auditor examining the manner in which customs offices operate.

Similar to and keeping in line with the above identified list of strategies and initiatives, McLinden (2005) presents in Figure No, 2.6 a very detailed list of strategies to reduce corruption in customs.

Adopting an appropriate system of brakes and counterweights, a customs administration brings all these characteristics together.

Supposing that the authorities are not disposed to interfere in day-today operations, greater autonomy can be an efficacious way of Figure No. 2.6. Strategies to Reduce Corruption in Customs

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Source: McLinden (2005):73

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establishing measures that foster integrity and the fight against corruption 15.

Taking into consideration the possible causes or factors that influence corrupt practices within a customs administration, it is important, prior to implementing new actions, to perform a diagnosis of the present situation of the administration. Specific information gathered should then serve, at the proper time, as a guide to refine the diagnosis of problems associated with corruption, designing actions of correction and prevention with more precision and effect.

It obliges confronting corruption in all its complexity, utilizing an integral focus that immediately eliminates its more visible effects, in the midterm modifying institutional conditions that favor corruption.

A good way to confront impunity would be based upon a thorough review and follow up on the professional and personal conduct of each employee. Just as the tax administration has demonstrated being severe with taxpayers who fail to comply with formal debts, customs has greater reason to be more rigorous with its own personnel for the violation of their obligations and conduct that reflects ignorance, lack of skills, negligence, imprudence or general irresponsibility.

II.3. Consequences of the lack of ethics in the work place

As this document has indicated, ethics and values have always been put before what is considered amoral. The effect of a lack of 15

All this analysis has been realized in function of the Ethics and Transparency System of the customs of

Canada and the strategy of Ethics and Transparency of the Superintendency of Tax Administration (SAT) Guatemala

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compliance with ethics affects the individual and the society in which he develops. Now in the 21st Century, modern societies are being impacted by phenomena of great transcendence. We can cite, among other

things,

globalization,

the

technological

revolution,

the

democratization of societies and the strengthening of the Fiscal State, that is, reinforcement of the role of taxes in the financing of State activities.

Tax

Administrations,

in

these

new

scenarios,

have

identified

important opportunities to raise the efficacy and efficiency of their management, but at the same time they have confronted serious challenges. One such challenge is the scourge of corruption and the participation of its personnel and employees engaging in the practice of illegalities, which, taken together, undermine society’s confidence in the impartiality, integrity and transparency of the management of tax and customs.

This concern, latent in many Latin-American and Caribbean countries, has obliged the organization of various conclaves to analyze the impact and propose more effective solutions against this ancient scourge. There is abundant bibliography that gives testimony of the initiatives developed by different governments.

Corruption not only attacks the more elementary precepts of ethics, the efficacy of the customs administration and its image, but in addition

it

represents

important

direct

collection

losses

and

obstruction of the promotion of compliance as a principal strategy by customs users.

It means the antagonistic contraposition of individual interests against the sacred principle of all public servants being integral to society, expressing itself in the inappropriate use of public power for individual gain. In spite of being in a new century, in recent years the

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most transcendent themes in questions of ethical solidarity continue to be the current of social tolerance for vicious and corruptible conduct and, from another angle, the construction of walls to protect moral values in order to slow anti-ethical advances in societies.

However, in recent years we have observed how public scandals of anti-ethical conduct have come to light, discrediting not only the image of the public servants but of the public institutions as well, causing the citizenry to lose its confidence in their authorities.

Although not typically sanctionable acts of corruption, dishonest and anti-ethical conduct is morally reprehensible, delegitimizing those engaged in it in positions of professional activities in the Public Administration. For the State this lack of ethics translates into a loss of foreign investment, a drop in the GNP, a divorce between its citizens, and damage to the political system. Among many other evils, it provokes the de-legitimization of the customs administration.

Susan Rose-Ackerman, prestigious professor and codirector of the Yale University Center for Public Law, Economy and Policies, former World Bank consultant and author of dozens of articles and books, has pointed out the best way to get rid of corruption. She says, "There should be people at the top who want change. It is valuable to have society groups calling for changes, but political leaders interested in confronting corruption are necessary.�

In that sense, it is timely to point out that corruption damages, for the simple reason that important decisions are made for hidden reasons, or they may be made in accordance with motives other than legitimate, with no concern for the consequences they can have for the community in general. In recent times we have been able to observe the impact that corruption has on the market, and on direct foreign investment (DFI). In that context, Transparency International

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states that among the principal costs occasioned by corruption are the following: •

A corrupt act means that the government’s objectives are not attained.

•

Corruption contaminates the environment in which the private sector has to operate, leading to the stockpiling of quick (and excessive) benefits in unpredictable circumstances.

•

Corruption discourages domestic investment, excludes potential new participants, and thereby reduces private sector participation and growth.

•

Corruption implies increase costs of administration.

•

Corruption exercises a corrupting influence on the administrative apparatus, undermining the value necessary to adhere to high standards of honor (“when morals decline: each man asks himself why he should be the single custodian of morality”).

•

Corruption in the government perceived by the people undermines respect for constituted authority and therefore the legitimacy of government itself.

•

If there is a generalized belief that elite politicians and elite public servants are corrupt, the public cannot see why it should not also serve itself a piece of the cake.

•

Corruption occasions a substantial loss of productive effort because time and resources are dedicated to making contacts for power, going around the system, instead of improving credentials and objectively strengthening one’s own case.

•

To the extent that corruption represents institutionalized injustice it brings forth invented litigation and charges which can be used to blackmail even the honest functionary; and

•

The more common forms of corruption in some countries - bribes and payments for facilitation – lead to decisions being made in

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Customs Management and Leadership. 4th Edition.

accordance

with

monetary

Module 6

considerations

instead

of

human

necessities.

Consequently, as we have seen in the prior chapters, the lack of ethics in customs can promote corruption, which is a scourge and a factor in the breakdown of social cohesion. It limits the resources that the State needs for education, health and security. What diverts the welfare of the collectivity toward the welfare of those who direct the resources can cause a negative effect on people’s health by not requiring compliance with the requirements or licenses for the merchandise to gain entry. At the same time, a lack of ethics in customs provokes a failure to comply with sanctions or failure to initiate judicial procedures to punish those who are responsible for failure to observe national procedures and laws.

In relation to the foregoing, the damages are principally felt in three fields: •

In the economy, where they increase the cost of goods and services.

For a detailed analysis of the economic impact of corruption, you can view the following videoclip featuring Professor Joe Nellis of the Cranfield

University

School

of

Management:

http://www.youtube.com/watch?v=dQ1gjyPQ4SU

•

In the political arena, where they reproduce and consolidate the practice of exclusion and social inequality, preserving networks of complicity among the police, military and economic elites and strengthening the force of impunity. Additionally, they delegitimize the political system in its entirety; and

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in the social realm, where they accentuate social differences to limit the role of the State as mediator of the demands of different social groups, to those who concentrate political, military and especially the economic power.

In general, initiatives that encourage transparency and integrity imply that reducing corruption constitutes a purpose in itself. Such initiatives are also necessary to attain the greater objective of a more efficacious, just and efficient government. The activists who fight corruption should be concerned not only with corruption per se, but even more with the effects it has on society.

Therefore, it is important to evaluate the costs of corruption and understand that it is impossible to eliminate completely and all at once, but that it can be fought.

Unit Summary

Corruption is the action and effect of corrupting, a synonym of depravity, tossing the good away, suborning someone, perverting or damaging. It is important to point out that the anti-corruption conventions

that

offer

an

international

juridical

framework

to

governments and citizens are of vital importance. They can be taken as references to implement initiatives designed to

strengthen

government institutions and abate the problem of corruption. All these conventions are the manifestation of an international consensus that arose early in the 1990s identifying corruption as an important problem that requires solutions of an international order. The anticorruption conventions are of essential importance to the creation of a framework aimed at: (a) approaching transnational themes that facilitate international cooperation in the application of the law, 66

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requiring countries to penalize corruption; (b) harmonizing legal and institutional frameworks for the application of the law and; (c) establishing collaboration mechanisms.

There are several reasons why customs is more vulnerable to corruption, and why this agency has always been targeted. It is desirable for persons assigned functions in customs matters, whether in the public sphere or the private, to be of professional caliber and for its technicians to avoid the temptation of what is called “easy money.� Corruption is easy when such values as responsibility, honesty, honor, the spirit of service, tolerance, etc. are lost. But the phenomena also develop with the abuse of power and decision making, when the lack of institutional and social controls allows, and when citizen organization is weak and participation is scant.

It is necessary to mention that customs is more vulnerable to corruption when the organization is inadequate and bureaucratic, operates poorly and is served by numerous personnel.

Corruption becomes easy if the personnel are below the level of professionalization, poorly paid and have a high index of immorality.

It also becomes easy when there is a number of disperse standards arising from a lack of coherence and systematization in operating procedures, leading to the existence of excessive controls. and a lack of knowledge of the various procedures. It is more likely to occur as a result of inadequate recruiting, selection and promotion of personnel, a lack of incentives to face the challenges and responsibilities assigned, a lack of investment in the customs administration; and finally at the State level, when there is no support to develop the service.

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A number of actions can be taken to slow to slow corruption. This includes the passage and use of clear and simple legislation that contains an efficacious system for the imposition of administrative sanctions; having computerized processing of the declarations of merchandise and other information which importers, exporters and auxiliaries must present to customs; as well as safeguarding the equity

and

neutrality

of

the

customs

system

through

the

professionalization of functionaries (i.e. the use of administrative personnel whose attributes are clearly defined and who are held accountable for their performance).The conclusion is reached that corruption causes damage since important decisions are taken for hidden motives or taken in accordance with far from legitimate motives, with no concern for the consequences they can have for the community in general. This lack of ethics gives birth to corruption - a scourge and a factor contributing to the collapse of social cohesion, causing a lack of resources that the State needs for education, health, security, etc.

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Unit III. Professionalism in public management

Learning Objectives

•

Define the meaning of professionalism

•

Identify at least two (2) different stages involved in the process of developing

a

strategy

for

promoting

integrity

and

fighting

corruption •

Analyse

how

professionalizing

the

personnel

of

a

public

administration and therefore customs personnel will impact the ethical performance of customs functions

III.1. Concepts

To arrive at professionalism it is important to start with the term profession.

Different

dictionaries

establish

that

etymologically

profession comes from Latin “professio, -onis”, which signifies the action and effect of professing. In practice, the concept has different meaning, including the job, faculty or office that a person has and publicly exercises. The ancients in the 20th Century considered the public protestation or confession of something (the profession of faith, of a political ideology) a profession. 16

16 Biblioteca Virtual of Derecho, Economía and Cienosas Social, de la Universidad a Distancia Eumed.

Euned.net

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An outstanding aspect of the UN Convention is that it employs a very broad definition of the term "public functionary," including all persons who occupy a legislative, executive, administrative or judicial position in a Member State. It also includes the personnel of international public organizations and requires the imposition of sanctions for anyone who offers them a bribe.

From functionalism, Millerson (1964) explained that the professions realize functions that are valued, such as the utilization of capacities based on theoretic knowledge, education and training, guarantee of competition in the individuals due to examinations, having a code of conduct that guarantees professional integrity, realization of a service for the public good, existence of an association that organizes its members.

We see then how the foregoing acceptance is adapted more to what we are looking for in this module because while it does deal with having knowledge, professionalism is the cultivation or utilization of a certain discipline or art as a means of profit.

We could then say that professionalism is the direct consequence of being a professional. A professional is an individual who has a particular profession and exercises it in accordance with its socially established guidelines, noting that the aforementioned guidelines are also fixed by the public enterprises or entities to whom the service is provided. The enterprises or entities possess standards of conduct or codes of ethics, which have been converted into the tools of the institutions for telling its personnel and employees what is expected of them.

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In this sense, the guidelines of professionalism can become quite varied, ranging from physical aspects and appearance (such as dress) to moral and ethical attitudes (such as compliance with duty in any situation and reality). USAID, in its manual of modernization of customs: “How to Establish and Implement a Program of Customs Integrity,� signals the importance of a Code of Ethics that regulates the conduct of the customs employees and personnel, but also focuses on the physical aspects and appearance of professionalism.

Customs must internally communicate when a stage of change begins, generating a strategy by implementing a program of transparency in such a way that the personnel and employees do not underestimate the commitment of customs to increase the level of professionalism thereby improving public perception.

In

the

relationship

between

ethics

and

physical

aspects,

the

aforementioned manual alludes to the fact that the message should be

transmitted

that

customs

requires

ethical

behavior

of

its

personnel, providing information on how to present accusations of improper

conduct.

At

the

same

time,

the

message

will

be

complemented with others that contain information on the rights of citizens and the Code of Conduct (in an abbreviated manner). All this should be included in a campaign for professionalism.

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Independent of the organizational structure in which customs finds itself, (as an agency of the Ministry of Public Finance, or as a part of the Tax Administration) customs personnel, as the USAID manual states , are among government representatives, the first of whom visitors,

businessmen

and

potential

investors

encounter

(in

Guatemala the first encounter with government authority is with immigration

personnel).

Customs,

therefore,

should

review

its

uniform standards and dress code to ensure that its uniformed personnel are professional in appearance. It is not necessary for the uniforms to be elaborate or costly, but certainly sufficiently distinctive to be able to identify customs personnel among the crowd and provide recognition to the customs administration. In such countries as the United States and Canada, uniforms are elemental in the development of the functions the customs functionary performs. With the

reorganization

that

customs

underwent

based

upon

the

September 11 tragedy, the security functions have been transferred to customs.

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Regarding dress, the majority of customs administrations use dark colors with just one color; the combination of the fabrics and designs depend on the country and the necessities of service, but should always leave the shirt pockets buttoned and have a tab to allow placement of a customs badge or insignia and indications of rank (this will allow the functionary or employee to be identified rapidly by the customs user to praise good service provided or to complain if there have been anomalies). Organizations like the World Customs Organization, the World Trade Organization, the Inter American Center of Tax Administrations, and others in the fight against contraband have, in their strategies to implement ethics, values

and

transparency,

stated

the

necessity

of

physical

identification of persons in the performance of their work as public functionaries.

The foregoing implies then that the attitude of professionalism involves acting like a professional at the time of exercising the task or activity;

the

person

performs

in

accordance

with

parameters

specifically established for the task, also in accordance with general and moral parameters of conduct. All this is connected to the fact that professionalism is not just a question of knowledge, but principally, of attitudes such as honor, enthusiasm and execution, tenacity, humility, a sense of personal dignity, professional ethics, sensitivity, a sense of social responsibility and commitment.

Some authors such as Brunner and Flisfich (1989), consider that the professions are essential, not only because they possess technical know-how, but because of the values they represent (Pacheco, 1994). This makes one consider that a professional, inspired by these principles, always tries to make the quality of his work the best of which he is capable, because he is conscious that work well done constitutes an example that others will eventually imitate. Let’s

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remember that work done with professionalism gives good results and confers moral authority. Those who do well can, at a particular time, question the actions of those around them. At the same time, professionalism implies improving the provision of service and therefore an improvement in the institutional image. This changes the perception of customs personnel and employees who do not comply with their obligations, are the subject of delays in the procedures or who seek personal benefits. An example of lack of professionalism can be repetitive commission of errors or lapses on the part of employees, lack of direction, supervision capacity, or decision-making and leadership on the part of directors.

We can conclude, then, that only when each person performs his work with authentic professionalism, discipline and work ethics, can society as a whole take its first steps toward the road to selfimprovement and continual betterment. 17

III.2 Promotion of ethics in the workplace

We have seen how professionalism implies physical, external aspects as well as the internal moral aspect of ethics, manifest in daily duty.

In this paragraph we will merely confirm the importance of the promotion of ethics in the workplace, since we can often ask why we do good or not. There can be many responses, but focusing on what is done in the workplace implies that to do good we must be ethical, complying with the standards of ethics and conduct established by the institution to which we provide our services, and that implies being honest in all situations. When we consider that our action 17 En El reto de la renovaciรณn, Capitulo I del Libro de Consulta de Transparencia Internacional. Se puede consultar el www.transparency.org/tilac

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should not be seen in public we must question ourselves if it isn’t in conflict with generally accepted standards of conduct. Other aspects to take into account are tolerance and flexibility, in the sense of having the capacity of listening to the ideas of the colleagues because many apparently absurd ideas can be the solution to a problem.

Therefore, acting good or bad is our own responsibility.

It is important to mention the study made by Harris Interactive on behalf of Deloitte & Touche USA by way of example. It showed that the behavior of the management and direct supervisors, along with positive reinforcement of ethical behavior, constitute the most important factors for promoting ethical conduct in a company’s workers. In contrast, the study also showed that sanctions and ethics training in the companies did not contribute to impeding unethical behavior at work

The questionnaire carrying out this study also revealed aspects that are important in the workplace and determine the degree of satisfaction with the workplace, which can impact ethical behavior.

The questionnaire results, as shown in Figure No. 3.1, highlighted the following:

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Figure No. 3.1. Study Findings on Workplace Factors and their Impact on Ethical Behaviour

Employed Adults 

Behave in an ethical manner if they have balance between work and life



High levels of stress



Long working hours



Inflexible schedules

Source: Own preparation based on the study made by Harris Interactive on behalf of Deloitte & Touche USA.

Other data obtained with respect to Management and Supervisors in regard to ethical behavior in the workplace

showed the following:

Only 10% of the adult employees thought sanctions for violating the Code of Conduct was one of the three principal factors that contributed to promoting an ethical work environment, and only 16 % classed ethics training as a factor that positively influenced the promotion of ethical conduct.

What these statistics show is precisely what we have been saying throughout this document, that instruments or standards in relation to ethics are important and should be implemented. But it is not enough to have the documents. The fact that they are positive, if they are not applied, there is no conviction and values in the personnel and employees who have to put them to work. It is important to add that the supervisor’s example is an influential factor in the behavior of the employees, as can be seen in this investigation.

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It is not enough to talk about ethics, they have to be demonstrated.

This interrelationship also directs our attention to the leadership and commitment of our authorities - getting activities underway that lead to a search for teamwork, as a way of listening to people and evaluating the situation without judgment under pressure based on suppositions and, above all, giving credit to those who really merit it.

In the same way, the preparation of a strategy such as that implemented at the world level by different organizations is a good practice to promote ethics. In order to arrive at a strategy, we must first undertake a review of self-evaluation to identify the institution’s strengths and weaknesses, so as to set forth possible solutions in the strategy.

In line with the aforementioned, Figure No. 3.2 presents a process model for developing a sound ethics infrastructure through the promotion of ethics, integrity and professional standards.

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Figure No. 3.2. Process Model for Promoting Ethics, Integrity and Professional Standards.

Source: RIPA International

Below, examples are provided of initiatives undertaken to promote integrity and fight corruption.

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An example is the establishment of the different guidelines that have been set forth to initiate a strategy to implement the promotion of ethics and the prevention of acts of corruption.

However, citing the activity developed in Guatemala, the guidelines are oriented to assist in the consolidation of transparency in customs management, that being the central axis. The objective of the strategy is to consolidate transparency and ethics in customs management over the long term, by means of implementing solutions

oriented

to

strengthening

various

elements

that

contribute to the institutional capacity to promote ethics and the fight against corruption at the level of customs.

Another example is provided by customs in Argentina where nonintrusive review (scanning) was introduced. During the first years of its implementation it improved collections, but primarily the users’ perception of risk. Scanning derived from the transparency initiative in the Customs Administration, where a Code of Ethics was implemented as well.

For the implementation of a strategy to promote ethics and prevent acts of corruption, the personnel and employees must be fully knowledgeable of the roles required of them in their respective agencies in order to assume their commitment. People must be designated responsible to carry out the activities defined in the strategy action plan.

The role that customs personnel and employees should perform must be structured in accordance with a descending scale, beginning with the maximum authority of the institution.

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Senior management is responsible for: •

contributing

to

the

development

and

approval

of

actions

established to implement the strategy and its action plan; •

assuming leadership in the promotion of ethics in relation to the entity’s personnel and employees, as well as with the public and private sector;

•

preparing the internal provisions that facilitate and guarantee implementation of the strategy, and its action plan; and

•

convoking

periodic

meetings

with

middle

managers

in

the

institution with the purpose of coordinating and analyzing the actions to follow for efficient implementation of the strategy and the plan of action.

The foregoing is connected to what was explained in the chapter on strategy and the code of conduct.

However, it is important to point out the role that the middle management should be playing. This includes: •

ensuring the execution and the implementation of provisions approved by the maximum authority for the promotion of ethics and the prevention of acts of corruption; as well as

•

demonstrating the denunciation of acts of corruption at the internal level.

The middle management should participate and contribute to the development of specific actions defined in the action plan, permitting the Heads of Departments, Units or Sections, as the case may be, to promote the practice of ethics and the prevention of acts of corruption by personnel for whom they are responsible at the internal level, as well as contributing to the resolution of ethical dilemmas that can arise among their personnel.

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Consequently, the role of administrative and operating personnel in the strategy of ethics at work will be to contribute by practicing ethical behavior and denouncing acts of corruption at the internal level in compliance with provisions approved by superior authorities.

They must participate and contribute to the development of specific actions defined in the action plan.

Another aspect to take into account is the relationship of the customs administration with the private sector or customs system users. For that purpose, Guatemala implemented the Integrity Pact drafted by the OECD, an organization that conceived it generically as “a contract by means of which the proponents of a specific international bid are explicitly committed, between themselves and with the respective government not to offer or pay bribes and to accept specific fines should they break their commitment.� In that context, Integrity Pacts have been agreed to and signed as voluntary agreements between all the actors who intervene directly in the process of contracting public resources in Guatemala in order to guarantee transparency, equity and the sustainability of the contract modality chosen.

Therefore, the process of implementing an Integrity Pact constitutes an invitation to a voluntary cultural change. It seeks to encourage specific groups of citizens to accept a common regulatory system linked to a regime of gratifications and punishments that go beyond those established in the legal framework. They offer added value to the legal framework. Derived from this study, Guatemala is the first country to utilize the Integrity Pact in customs as a means of combating

corruption,

implementing

a

commitment

of

Private

Initiative and the Public Entities that make up the National Customs system to promote transparency and eradicate corruption in all its forms. It is also an attempt to make foreign trade more agile and

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improve the perception of State revenue, offering efficacy and efficiency in favor of the common good.

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Integrity Pact aspects include: Mutual commitments: •

Detection, suppression, investigation and sanction of discretional and corrupt practices.

•

Identification of factors, processes, procedures, systems, areas or elements that elevate the risk of corruption.

•

Study, training and information that help prevent those practices.

•

Promotion of the Integrity Pact and ethical behavior in each party’s organization.

•

Participation in Customs Users Committees.

•

Reporting or denouncing practices of: Tax Fraud; Contraband and Customs Fraud; Transgression of the Animal and Vegetable Health Law; Unfair Competition and Falsification and Use of False Documents.

Integrity Pact users in Guatemala are identified in the following Figure No. 3.3: Figure No. 3.3. The Institutional Environment of The Guatemala Integrity Pact Public Providers of Foreign Trade Services MINECO

Cargo Agencies and Consolidators



Ship Owners Customs agents Stevedores Transporters Warehouse Companies

Port Enterprises



Ministry of Agriculture DIPA-PNC

SAT Customs



Exporters and Importers

Exporters and Importers

Private Providers of Foreign Trade Services





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Source: Own preparation, based on the entities that participate in the Guatemala Integrity Pact.

Unit Summary

Professionalism relates to the profession, job, faculty or office that each professional has and exercises publicly. This implies that the attitude

of

professionalism

involves

acting

professionally

when

exercising a professional task or activity. The professional person performs in accordance with specifically established parameters and within the general parameters of moral conduct. It was determined in the development of this chapter that professionalism implies physical aspects and externalities such as morality and ethics, which are manifest in daily duty. The importance of the promotion of ethics in the workplace was confirmed. Special emphasis was put on the role of administrative and operational personnel, who must have a level of professionalization consistent with the work they perform.

In order to attain efficacious professionalism middle managers should participate and contribute to the development of specific defined actions, allowing the Heads of Departments, Units or Sections, promotions and incentives in accordance with the education and development of each customs officer.

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Another focus of the section was the use of examples from different countries, spotlighting the case of Guatemala, which signed an Integrity Pact, derived from one designed by the OECD, that regulates the proponents of a specific international bid. Pact signers are explicitly committed, between themselves and with the respective government, not to offer or pay bribes and to accept specific fines in case of breaking their commitment. Aspects that the Integrity Pact contains,

among

other

things

are:

detection,

suppression,

investigation and sanction of discretional and corrupt practices.

Factors, processes, procedures, systems, areas or elements that elevate the risk of corruption are identified. Study, training and information helps prevent those practices, as does promotion of the Integrity Pact and ethical behavior in each party’s organization. They must participate in Customs Users Committees as well as reporting or denouncing practices of tax fraud; contraband and customs fraud; transgression of the Animal and Vegetable Health Law; unfair competition and falsification and use of false documents.

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Unit IV. Practice cases

Learning Objective

•

Describe best practices in the field.

IV.1. A case study of Cameroon 18 (Thomas Cantens, Gaël Raballand and Samson Bilangna)

IV.1.1. Summary

Many

customs

administrations

have

suffered

corruption

and

difficulties in identifying options to improve this infirmity. If they hope to reduce corruption and, at the same time, strengthen their Institution’s

performance

by

increasing

revenue

collection

and

improving the facilitation of trade, authorities must carry out experiments that may help in identifying constructive policies. Such an experiment has been performed by Cameroon Customs with some preliminary positive results. In 2007, Cameroon implemented a reform of the Customs Administration that included the installation of SIDUNEA (Automated Customs Dispatch System).

18 This is a pilot case developed by the World Customs Organization. The complete document is in English and for the effects of this study is condensed, excluding bibliographic references: At the same time it is important to emphasize that this is a free translation. [English translator’s note: This is a retranslation back into English without access to the English original.]

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In February 2010, as a continuation of the reform, the Cameroon Customs System established a system of performance contracts signed between the Director General and a number of first line personnel in the Port of Douala. The nucleus of a performance contract is an agreement that contemplates that official practices will be recorded and communicated to the Director General.

Four months after its application, initial results are encouraging with reduced corruption, increased revenue collection and shorter dispatch times. It may signal the birth of a new professional culture. This document focuses on the experience and the results as of now of the performance

contract

aspect

of

the

reform.

It

suggests

that

replication may benefit other customs administrations.

IV.1.2. Introduction

In 2007, the Directorate of Cameroon Customs put a reform and modernization initiative into effect. Specifically, the reform attempted to reduce corruption that had been a constant stain on the administration’s reputation for a long time. The reform began with the installation of SIDUNEA, a customs dispatch system that would allow the government to follow up on the processing of each shipment, as well as measure a great number of criteria pertinent to the reform, such as compliance with the period of time for registry of the manifest by recipients.

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For almost two years, the superior management officials and first line personnel

shared

the

same

reality

thanks

to

the

"figures"

(performance indicators) measuring the reforms initiated. Although this phase of initial quantification was fruitful, its impact on the identification of the problem gradually decreased. A possible solution was adopted as of 2010 and converted it to prescriptive quantification of the objectives established for customs personnel. More specifically, the Cameroon Customs system consists of individual performance contracts for integrally measuring the actions and behaviors of the customs personnel who operate in two offices of the Port of Douala utilizing indicators extracted from SIDUNEA. The second part of the document provides a general overview of the measurement theory and of the Cameroon Customs reform. The third section begins with a narration of the events and decisions that Cameroon Customs has taken in the last four years to present the quantification of its action. The fourth section deals with the principles and results of the last stage, the introduction of performance contracts. These contracts have had a positive impact on the inspectors’ professional practices, as well as facilitating the crossing of frontiers and the strengthening of the law. The fifth section is an analysis of the long-term impact, of the difficulties caused by introducing performance measuring and the last section concludes and presents possible next steps to be followed.

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New public management and contracts of performance In February 2010, the Cameroon Customs put an experiment into effect that consists of a creed and shares a series of words like autonomy, performance and quantification. This pilot test took place with the application of individual performance contracts signed between the Director General of Customs and two key customs offices in the Port of Douala. These contracts represent a new step in the process of improving performance that had begun three years before.

Performance contracts are based on the objective measurement of the actions of public personnel and financial incentives or professional promotion policies. In Cameroon, the overall objective of the contracts

is

to

encourage

customs

personnel

to

adopt

good

professional practices. In fact, the struggle against the bad practices is a key element in improving customs revenue. Corruption has a direct negative impact on customs revenue and competition in the private sector.

The history of Cameroon Customs demonstrates the capacity of the public sector to gradually absorb private sector techniques just as it is done in developed countries, where a pre-embarking inspection by a company (in effect since 1987) is responsible for evaluating imported products and some exports. It must be noted that some Customs personnel were dismissed and salaries of the public sector were reduced based on structural adjustment plans.

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However, the flexibility of the contracts of Cameroon Customs differs from the business sector. The depth of corruption signifies that the Director General is not well informed by his subordinates, and he does not know exactly how or to what extent the agents apply reforms that have been adopted. The contracts also have the objective of recreating and strengthening the hierarchy for the purpose of obtaining reform. The Cameroon experiment does not do it, therefore, they have the same vision of the NGP policies that Weber model of administration questions (Rouban 1998; Spanou 2003) and the result of the agency’s theories on the base of the useragent models.

IV.1.3. The impact of computerization

All the customs procedures have been computerized using the options offered by SIDUNEA. This computerization process abolished the "release note" that obliged customs agents and importers to return to the customs inspector once they had paid their customs debt for the purpose of obtaining that document.

Computerization has been accompanied by a process of greater autonomy on the part of customs dispatch.

The actors have been obliged to utilize the customs computer system to carry out their operations in their own installations.

Customs personnel have been reoriented in their work. The regular customs dispatch rooms have been closed. Customs personnel no longer jointly administer the customs depositories and port zones along with their private owners and connections to the customs network are no longer administered.

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IV.1.4. A turbulent launching in the Port of Douala

From the first week of its operation, SIDUNEA’s installation and efficacy were questioned in the court system. In Cameroon, the customs revenues represent 27% of national revenue, the State continues to be the largest employer and the majority of consumer products are imported. When the newspapers accused customs of losing more than 2.3 million Euros a day the rumors of commercial unrest and a loss of fiscal revenues was a social and policy threat. In the first days, the goods did not come out, containers piled up and, according to the operator, the container terminal ran the risk of obstruction. Paralysis was threatened to such point that a container terminal manager took the initiative of asking maritime agents not to send any more vessels to Douala. That message angered the authorities, who requested immediate transmission of a counter message.

The challenge was also propagated within Customs itself. The simplification of procedures distanced customs personnel from the users. Those who would have had to leave the customs depositories and zones would no longer receive the legal bonuses they received previously for their work, part of which was also redistributed to all customs personnel.

Many customs personnel therefore criticized the establishment of a system that they felt had been imported and installed under pressure from abroad (Cantens 2007).

The Director General and the Minister opted to explain reality as objectively as possible. That was a decisive moment for the future of the institutionalization of performance measurement.

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His message, initially designed to demonstrate that there no duties or taxes had been lost, since, if the goods had not left the port, their presence represented a guarantee. However, that argument was risky and responsible for motivating concern as to whether too many advantages had been conceded with very few guarantees.

The Director General was disposed for customs dispatch professionals to utilize SIDUNEA. A week after launching, in a public meeting in Douala, in the presence of importers and exporters, the Director General asked his head of the IT division to read out the first figures taken from the system: 30 professionals were on the list that had already worked on SIDUNEA, and the Director General recommended that the importers work with them instead of with the other 90 who have not yet operated with the new system because it had not been installed correctly.

In the following months, a team was constituted to respond to concrete requests from customs and the political hierarchy, providing them with daily information on revenues, declarations that have not been evaluated by the inspectors and the number of containers that had left port. The Director General brought to the operating managers, and on a regular basis as well, showed them the notes presented by the team, warning that there were figures and that the names of the agents who were not facilitating customs liquidation processes were known.

Rapid evaluation and greater control of first line service was fruitful; the system unstuck and, in spite of the rumors, January 2007 recorded revenues 15% higher than January 2006, 18% more than January 2005 and 24% more than January 2004. January 2007 was also a very good month in terms of processing times, as shown in Figure 2, in 2007 processing times were reduced in the following months, when they were not subject to the same pressure.

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At the end of 2007, all customs personnel were conscious of the potentialities of the internal auditing system of the service, having been victims or the ones who exploited it. The comparison of data was a threat that also weighed on the administrators of functioning; in their reports to the Director General they made it clear that it was no longer possible to systematically explain a reduction of revenue due to a decrease in economic activities.

Putting a policy of measurement into effect is a key pillar of the reform of Cameroon Customs.

In January 2008, the Director General decided that the performance indicators were a pillar of his reform policy and established a team of computer experts and customs officials. Structuring the flow of new information, the Director General responded to an obvious difficulty he faced, being in the field, that is to say, in a context of corruption, less informed than his operating personnel. That situation was accentuated by the transfer the Directorate General from YaundĂŠ, more than three hours distant from the port by road. The Director General of Customs of operations in the past, however, according to the description of some high officials who denounced him in 2006, gave the operators the possibility of rapidly impugning superior authority. By means of the relocation, the Director General was deprived of simple access for directing sources of information.

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Evaluation attained a certain a degree of institutionalization so that sporadic controls became more effective, and were thus converted into a “social process� (Varone and Jacob 2004). By means of the introduction of this system of indicators, the Director General made a choice radically distinct from those of his predecessors, standardizing the payment in SIDUNEA. Due to the fact that it was automatic, there is no customs dispatch system and the SIDUNEA PAYMENT can compete with the imagination of the thieves and their impunity. The system continues to offer information security designed to determine the identity of the actors and the irreversibility of their acts. But it is also judged by its capacity to provide the majority of the realistic images of possible customs dispatch in the field.

In 2008 and 2009, the Director General and the directors of operations met in Douala to examine the monthly report of the indicators. That report had been distributed before the meeting, in which each one of them noted their own results and the results of their colleagues, of each unit and of each inspector. These meetings gave the administrators the opportunity to better control their subordinates.

The results were tangible. The tax collection per declaration has been increasing: 21% between the first three months of 2007 and the second three months of 2009 in spite of the tax exemption measures for basic foods approved in March 2008. For goods imported in containers for domestic use, the average revenue per declaration has increased by 10% in 2007. The percentage of duties and taxes collected on claims in dispute without any type of increase of additional pressure imposed on the operators were elevated 0.75% to 1.02% following controls. The duties and taxes collected in this manner increased by 56%, while the number of disputed complaints increased by 12%.

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In regard to facilitation, 75% of the maritime manifests are registered in the system of 24 hours before the arrival of the ship, allowing 18% of the declarations that must be presented toward discharge of the merchandise. In the Port of Douala, between 2007 and 2009, the average valuation of all the customs offices together is reduced from 1.2 days to 0.8 days. The total time of processing between 2007 and 2009 is reduced from 6.5 to 5 days. Efforts were also made by transit agents and the managers of the customs depositories and customs dispatch zones.

Other results that are not quantifiable point to the gradual acceptance of the limitations connected to performance measurement and its integration

into

hierarchical

reports.

In

the

meetings,

some

operations directors appeared with laptop computers that allowed them to see the report on the indicators in a direct manner. Others presented a monthly report corresponding to the indicators with their own data they had been obliged to collect. In fact, some advanced indicators obliged the heads of the operating service to carry out their own internal investigations in order to justify their results. In one particular case, when the interpretation of the results continued to be opposed to the general direction and the operating services, the crossed controls revealed deficiencies of the provider of inspection prior to embarkation.

On the other hand, the revenue goals continued to grow (6% in 2010), while there had been a gradual fall in values declared as of the end of 2009 and afterwards. At the same time, the application of the customary actions of field personnel appears to have stabilized.

While this has little impact on revenue, it nevertheless continues to be an indicator of the relationships between customs personnel and users.

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IV.1.5. Performance contracts, a new step

One of the solutions provided was to go from merely descriptive measuring of results to a prescriptive measure. At the end of 2009, Cameroon Customs obtained World Bank financing to support performance contracts in the Port of Douala for an experimental period of six months.

Principles At this pilot stage the performance contracts have gotten underway in two of the seven offices in the Port Douala. These two offices collect 76% of port revenue. As with any another contract, performance contracts formalize an agreement between two parties, specifying mutual obligations in regard to results. The contracts go beyond the revenue

goals

that

are

fixed

annually

by

customs

for

the

Government. This situation is common to all fiscal administrations and offers a favorable terrain for the measurement of performance.

The Cameroon Customs contracts incorporate two characteristics that should be taken into account in the context of corruption. In the first place, they are signed between the Director General and, as an individual, the head of a sector (who directs the region), and the two heads of office and the customs inspectors. Each one makes a direct commitment with the Director General and not with his direct hierarchical superior. In the second place, the overall objectives inherent to all customs administration (facilitation and execution) are complemented

with

objectives

that

attempt

to

eliminate

bad

practices.

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In Cameroon, the objective, above all, is for people to comply with the formal structure, any break between their actions and the rules of the structure is measured; that reinforces the formal framework and does not question the Weber model of the organization of the administration.

The contracts are to evaluate individual compliance

with the

organization’s standards. On the other hand, the principle of rational choice that assumes that individual behavior is guided by an attempt to

maximize

individual

benefit,

which

characterizes

the

NGP

(Mascarenhas 1993) is carried to the extreme in Cameroon by individualizing contracts. The system of incentives and sanctions are therefore the heart of the reform. So a clear distinction should be made between sanctions and incentives.

Cameroon Customs had long ago adopted a policy of financial incentives by the distribution of revenue from fines and diverse memoranda

of

understanding

with

its

associated

professions

(Bilangna of 2009; Cantens 2009). During the meetings with the inspectors and their superiors to draft the contracts, the exchanges demonstrated the importance of non-financial incentives. In fact, given the method of distributing the production of fines that legally guaranteed each inspector 10% of the fine imposed, with no upper limit, the inspectors were not particularly interested in additional financial incentives. In any case, they did not appear to believe that the government could improve that 10% enough to compensate, in the case of corrupt inspectors, for the loss of benefits due to ethical behavior.

A

series

of

incentives

were

provided:

letters

of

congratulation, entering the congratulations of agents into their personnel files, easier access to the Director General by a regular meeting as the last instance.

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The professional aspirations of successful agents are being reviewed, training courses, etc. In regard to sanctions, a process of interviews and warnings has been introduced. The principal sanction continues to be expulsion of agents from offices with a strong economic potential, where the possibilities of legally earning money through impugned credits are high.

From this point of view, the threat of sanction by transfer to an office with few possibilities for earning money has a greater impact on personnel behavior than hope for an incentive. This coincides with the observations of Besley and Ghatak (2005) that no evidence has been found

that

incentives

are

more

important

than

benefits

in

organizations structured around the mission concept.

The experience of Cameroon therefore, is based more on contract management of deviant conduct (Crawford 2003); five of the eight contract objectives refer explicitly to bad practices that should be reduced in spite of the eight objectives being equally divided between four objectives of facilitation and four objectives of execution, after the two cardinal missions of any customs administration. These objectives are described in the following sections.

IV.1.6. The impact of performance contracts

Preparations for unrolling the performance contracts lasted various months from September 2009 to February 2010. The inspectors and their bosses were involved in all the preparation stages, from the drafting of contracts to the choice of indicators and periodical performance reviews. That led to the creation of a specific unit responsible for the program in question, made up of customs personnel and computer personnel.

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During the preparation stage, however, the contracts were not subjected to much debate, given their novelty and above all the operating agents’ distrust. After 13 weeks of the application, halfway through the experiment, the results were positive with surprising rapidity. That shows the efficacy of the contracts in regard to the will of the agents and their growth potential.

Average

performance

per

declaration

has

increased

10%

in

comparison with the three months preceding the introduction of the contracts and 16% in comparison to the six-month period prior to introducing the contracts. However, this notable increment should be put in perspective. In 2009, except for the month of December, the declared values and the number of declarations were stagnant at low levels for ten consecutive months. In 2008, the average performance per declaration was greater than the values cited in the period the contracts were applied. Therefore, it is difficult for the DP V Office to conclude that performance contracts have had a positive impact in terms of tax collection, in comparison only with the continual drop in the months prior to the introduction of the contracts.

The impacts of performance contracts on the impugned credits were also very important. In quantitative terms, revenue from disputed declarations has increased 17% for DP I Office and 322% for DP V Office between the contract period and the preceding period of the same length.

In qualitative terms, performance contracts marked a rupture. The inspectors abandoned low level litigious credits to concentrate on the more important ones. The adjustment average increased from approximately 1,500 Euros in the most recent months before the contract period to more than 3,000 Euros in March and April 2010.

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The contracts have also had an impact on bad practices. In the first place, changes of itinerary from the yellow channel to the red channel are more efficacious in terms of litigious credits. From this point of view, the inspectors show true discipline. In the second place, the practice of systematically compensating declarations in the yellow channel has drastically reduced and some inspectors have completely ended it. While on average 80% of the declarations are adjusted in the yellow channel by means of compensation of the entrance by the inspector who carried out the evaluation, this proportion was reduced to 7% in April for DP I Office and 19% for DP V Office.

IV.1.7. Conclusions

This document describes the reform of Cameroon Customs, the introduction of performance indicators and the preliminary results of measured performance contracts. The document shows the positive, although preliminary, results of individual performance contracts signed in two port offices through indicators extracted from SIDUNEA. Various lessons can be extracted from Cameroon Customs. Customs performance contracts are the point of encounter between two concepts that are the object of investigation and controversies: by the government on the one side, and the new public management on the other. Performance contracts are intersecting in regard to penalizing corruption and bad practices, while at the same time distancing themselves from points in common with corruption.

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As in the case of a crime or misdemeanor (Crawford 2003), a contract permits a return to the idea of a "situation of governance" (Blundo

2002)

and

the

necessity

for

empirical

investigation.

Corruption is a question of opportunities and of acts, not of predisposition or specific individuals. Taking into account the threat implied, and the use of a standard calculation method, contracts constitute a policy of corruption prevention and detection, up to a certain point. The fact that this is a pilot and not a vast, structured program has two advantages.

In the first place, Cameroon Customs have controlled the risk that a conceptual reform of this type could pose for the collection of revenue. On the other hand, the contract dimension demonstrates to all the agents that the hierarchy is really committed to concede greater flexibility. That always remains in doubt (Behn, 2002).

Wholey

and

Hatry

(1992)

defined

four

conditions

for

the

measurement of performance: the appropriate time (not necessarily in the preparation of the financial balance), comparison (with the past or with an objective), selection (it is not possible to measure everything) and low cost. In the case of Customs, we have seen that the time was a key element in the success. Taking the time to put the contracts in practice was the priority of the general directors. In addition, the objectives of the contracts have always been calculated on the basis of prior year performance. The historic dimension is essential – any reform should also assist in clarifying what the change is helping bring about. Finally, in terms of costs, everything that has been developed for the measurement of performance has been achieved using free software.

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Establishing a policy of indicators and performance contracts has the advantage of giving more weight to the empirical knowledge of how the real administration develops a framework for its own evaluation (Varone and Jacob 2004). However, this advantage is often perceived as more of a risk; quantification of public action is a leap into the unknown and the heads of administration can be afraid to reveal the defects in their structure. In a certain mode, they are inevitable. The Cameroon pilot is of interest in that it is carried out in a context where the public servants were all characterised as corrupt by the public. There was little resistance on their part to investing in the culture of performance for the purpose of demonstrating that this was not certain, and for emphasizing the efforts realized.

As next steps, more lessons can be extracted at the end of the pilot test. If the results are confirmed, performance contracts will probably be extended to more offices and the question of replication by other customs administrations will be worthy of consideration.

IV.2. Case study of the Tax Administration of Guatemala

IV.2.1. Summary Abstract

This case study is centered on the distinct activities that have been undertaken by the Superintendency of Tax administration (SAT) of Guatemala, to increase personnel integrity and thereby reduce acts of corruption in Customs. SAT is a young entity by virtue of the fact that it has been functioning only 13 years and it is an interesting case.

When it was formed it inherited an unreliable and inefficient customs system.

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In this study, the activities carried out by SAT are shown to be in accordance with the 10 points established by the Revised Declaration of Arusha of 2003. Additionally, it demonstrates how the application of ethical measures that seek to form a transparent entity have positive repercussion on the collection of taxes.

IV.2.2. About Guatemala

Guatemala is located in Central America and has the largest economy in the Isthmus. According to the Central Intelligence Agency (CIA, 2009) Fact Book for the year 2009 Guatemala had an estimated 13.2 million inhabitants and a Gross Domestic Product (GDP) of 69.22 billion dollars and imports of 10.91 billion dollars per year.

Between 1960 and 1996, Guatemala had a civil war. That war ended with the signing of Peace Accords in 1996.

Among various factors, the Peace Accords identified poor tax collection and a goal has been set to raise tax collection to 12% of GDP. To attain this, customs of Guatemala have been constituted as the primary axis of collection.

IV.2.3. Background

Traditionally the tax administrations in developing countries are qualified as “weak, corrupt, inefficient, and with high costs for complying with their requirements� (Jenkins, Khadka, 2002, p-136).

Although that is the global situation, it can probably be argued that the case of the Tax administration in Guatemala is different.

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Tax collection in Guatemala began in the Colonial Era when the Diputación Provincial collected and administered for Spain’s Public Treasury. Beginning in October 1825, after Independence, the Congress of the Republic decreed that the Directorate of Finance would carry out the functions of Secretariat of Finance and Public Credit. The aforesaid Secretariat of Finance functioned for 146 years.

In December 1971 the Congress of the Republic of Guatemala instituted the Ministry of Public Finances, where the General Directorates of Internal Revenue and Customs implemented the functions of Tax Administration.

IV.2.4. Customs system in Guatemala

In Guatemala, the customs system is made up of public and private agents such as Couriers, Ports, Customs Agents and Banks.

Guatemala has no local customs law. Instead of a customs law, Guatemala has participated in the efforts to integrate the Central American economy, so that it is subject to the provisions of the Central American Uniform Customs Code (CAUCA) and its Regulation (RECAUCA).

The first unified version of duties (NAUCA I) came in 1959. This code later evolved into the Central America Tariff System (SAC). At the present time, Guatemala applies the Harmonized System supplied by the World Customs Organization.

Administration of the customs system has presented great challenges to the Government of Guatemala over of the years. The principal problems are presented below:

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IV.2.5. Lack of transparency and results

Customs do not have a good image in Guatemala. Moreover, the reputation of the Directorate of Customs and the results were not what was expected by the Government and the Guatemalan people.

In 1996, the Minister of Public Finances of that era, Jose Alejandro Arévalo, stated in various communications media that the State of Guatemala was in a “frontal struggle” against fiscal fraud and contraband. The problems of the Customs of Guatemala were clearly identified in the mid-90s. Rosales and Barahona (1996), for example, analyzed and identified the disadvantages of the procedures utilized, saying that the procedures at that time required a great quantity of seals and manual handling. It was so bad that people who interacted with customs preferred to pay bribes to make it easier. In 1996 the magazine Crónica told how the carriers going to or from Mexico would have to stay overnight in the city of Tecún Uman, a city cataloged as dangerous because of the common assaults. Therefore, the carriers would decide to pay a bribe in order be able to continue on their way.

That

magazine

estimated

that

Customs

and

Finance

Police

collaborators made Q. 500.00 a day (at the time the Guatemalan quetzal was on parity with the dollar).

In the Rosales and Barahona study, it is possible to appreciate certain collaborators’ lack of ethics. For example, they gave the case of “Juan,” a person who said he did not want to work and neither was he interested in training. He said he could not be dismissed because he had family members with important positions who helped and protected him. If he were dismissed he commented that he would sue customs in the courts and would surely be restored and that they would owe him back pay for the time he was not working. There had already been a case of a person to whom they paid 5 years of back

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wages because he belonged to the union of the Ministry of Public Finances.

IV.2.6. In depth solution

The

solution

proposed

to

fight

against

the

corruption

and

inefficiencies of the procedures was to undertake a conjunction of actions oriented to transform and strengthen the country’s tax system. The creation of the Superintendency of Tax Administration (SAT) was included among those modernizing

the

tax

administration

actions with the object of and

complying

with

fiscal

commitments contained in the Peace Accords and the Public Sector Modernization Program.

The project of creating and putting SAT into operation began in September 1997 with the integration of a work team responsible for administering it. The general project objective consisted of creating, designing and establishing an autonomous, decentralized, modern, efficient and efficacious institution that would take charge of tax administration and customs and be capable of increasing tax revenues in a sustained, honest and transparent manner.

The Congress of the Republic approved the creation of SAT with Decree Number 1-98, which took effect on February 21, 1998, and it slowly began to assume its functions. It assumed the functions and control of the Customs of Guatemala on January 5, 1999.

The Superintendency of Tax Administration is a decentralized State entity with competency and jurisdiction throughout national territory to exercise the exclusive function of tax administration contained in the legislation. The Institution enjoys functional, economic, financial,

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technical and administrative autonomy, has juridical personality, patrimony and its own resources.

IV.2.7. Results of the SAT

How successful has been the reform driven by SAT? To judge it 13 years after its creation may be somewhat premature. However, a review of tax collection tendencies can suggest that SAT’s results are positive. Graphic 1 shows the value of the cargo tax in relation to the Gross Domestic Product (GDP) between the years 1989 and 1995. It can be seen that the amount collected never exceeds 10% of GDP. In the year 1992 a peak was obtained that represents almost 9% of GDP. This behavior, not being able to collect at least 10% of GDP, has been endemic in Guatemala since the 40s.

Graph 1. Variation of real GDP and cargo tax, 1989-1995 (Percentage)

Source: Ministry of Finances and Bank of Guatemala

Graphic 2 shows the 3 years prior to the creation of SAT (19951997), the low collections tendency was maintained. Beginning in

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1998, with the creation of the SAT, collection can be seen to begin to grow in a sustained manner. While there was a decrease in 2003, after 2005 tax collection began to rise again and for 2006 the percentage collected reached 12% of GDP.

Graph 2. Variation of real GDP and cargo tax, 1996-2006 (Percentage)

Source: Ministry of Finances and Bank of Guatemala

The factors that have helped the SAT of Guatemala to increase tax collection in a sustained manner can be approached in various manners. This case study presents efforts sought to strengthen integrity in SAT’s personnel and at the same time reduce any act of corruption.

Utilizing the Revised Declaration of Arusha as a lens of analysis, the following details how SAT in Guatemala has implemented various actions that have helped reduce corruption and at the same time increase personnel integrity. These actions have, in turn, permitted tax collections to increase in a sustained manner.

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•

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Leadership and Commitment. SAT superior authorities are the Board of Directors, the Superintendent and, in the case of customs, the Intendant of Customs. They have supported and been the motors of change to introduce ethics into SAT.

•

Regulatory Framework. All customs regulations have to be simplified in order for the taxpayers to be able to comply with the rules without incurring additional expenses. In the case of SAT, from the beginning rules have been implemented that guide taxpayers to utilize electronic media to reduce costs and increase transparency. SAT issued resolution 059-2000, on July 7, 2000, for example, that permitted the presentation of customs papers by electronic media.

•

Transparency. In order for taxpayers to have a better perception of transparency in regard to the laws, the Superintendency of Tax Administration has placed the procedures and institutional criteria on its web page, along with the laws and regulations that govern customs processing.

•

Computerization. Systematization of customs functions has had a favorable repercussion on efficiency and effectiveness while reducing opportunities for corruption. On initiating its functions SAT inherited two information systems from the old Directorate of Customs: SISAFAU and Bankpol, which had the reputation of being neither efficient nor transparent. SAT therefore began to develop SIAG, a system that allowed all the customs paper payments to be made through the national banking system. SIAG began to operate in 2000. While the SIAG system presented a more transparent system and at the same time permitted investing in a robust technological infrastructure for SAT, the authorities of that era expressed some concerns, for example, when the system presented technical difficulties and stopped functioning. At the 109

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same time they were looking to introduce new procedures and functionalities and the SIAG system did not allow changes in an efficient manner. For that reason, the development of the Saqb`e system, which is based on a system of flows began in 2005.

(Saqb`e is a Maya word that means white road or transparent). As Aguayo and his colleagues (1997) mention, a system based on flows automates procedures previously carried out by hand and in operation the information system carries out activities previously accomplished by persons. One of the first flows automated through Saqb`e was the Temporary Admission of Containers (ATCs). ATCs are used by shipping lines with the objective of requesting permits to introduce containers into Guatemala. ATC processing was reduced from days to hours and transformed a process where people interacted to a process where all the processing is accomplished electronically. Saqb`e undoubtedly minimized the discretional power of personnel and their interaction with taxpayers. In addition, it ensured that all reception of resources would have to be accomplished through the national banking system. •

Reform and Modernization. In a general sense, corruption blooms when customs procedures are archaic and ineffective. The SAT of Guatemala has been concerned to establish procedures like Saqb`e where the majority of procedures are not carried out by persons. In addition, it has voiced opinions on updating fiscal laws to bring them into accord with the present epoch.

•

Auditing and Investigation. Implementing mechanisms that strengthen internal control by means of different types of auditing is a good practice to minimize corruption. SAT has therefore implemented auditors in both the Internal Auditing Management in Special

Investigations

Management,

units

charged

with

determining whether the denunciations presented by taxpayers 110

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are true. When such a situation is shown to be true by rigorous investigation, dismissals and sanctions are determined for those involved.

•

Code of Conduct. A key element of all ethics programs is to inform the collaborators of the behavior expected of them. SAT has developed different efforts, combining them in official form in implementing its Code of Ethics and Conduct for the Personnel and Employees of the Superintendency of Tax Administration, in June 2008.

•

Human Resources Management. In the case of SAT, the largest quantity of initiatives oriented to avoid corruption have focused on the selection of its personnel, for which purpose the Human Resources Management has computerized procedures to recruit people interested in working in the Institution. It also has different training programs to see that internal personnel are offered vacancies in accordance with their preparation.

•

Organizational Morality and Culture. In the Tax Administration of Guatemala, special emphasis is given to the human element that comes to work in the Customs Intendancy and receives initial training where moral values and organizational culture prevail. In the majority, those who enter this area are university professionals and achieve greater professionalism in the functions they perform.

•

Relation with the Private sector. All customs administrations should strengthen their relationships with the private sector with the objective of forming a transparent unit. At the same time they should have the capacity to render accounts to their users. For that reason the Integrity Pact was signed with customs system user entities, to keep watch that compliance with the procedures and regulations is better on both sides.

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IV.3. Phases of Institutionalisation of Programmes to Promote Integrity and Fight Corruption

IV.3.1. Phase I: Internal Efforts to Implement Ethics (19982004)

In compliance with the provisions of the Organizational Law of the Superintendency of Tax Administration (SAT), as well as the constitutional

principles

that

should

characterize

public

administration, SAT gathered a group of personnel at the beginning of 2000 who began a study of unethical conduct in the Tax Administration. They had to consider doctrine, administrative and operating aspects to develop the first legal instrument.

From that study emerged the “Code of Professional Ethics of the Public Servant of the Superintendency of Tax Administration (Board of Directors Accord 142-200).� It was in effect from November 6, 2000 to June 19, 2008.

This Code was made up of eight chapters, which regulated standards of conduct, prohibitions, non-acceptance of gifts and favors, duties, the treatment of taxpayers, conflict of interests and the ethics committee. However, in spite of it being a positive standard, this committee was never constituted, in part due to the fact that personnel did not consider it to be a priority among their functions.

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During the following the years some efforts were made to recover public credibility. In 2004 SAT centered its efforts on making its purchase

procedures

transparent.

That

was

recognized

by

Transparency International and Citizen Action, awarding the prize for transparency by the use of the government system Guatecompras.

However, those efforts were isolated and not in response to a specific strategy that addressed the promotion of ethics in an integral manner.

IV.3.2. Phase II: Rapprochement with the Private sector (2005 and 2006)

Until 2004, few procedures had been designed, documented and aligned with institutional objectives and there were few and uncertain technological applications. Customs operations are centralized on the dispatch of merchandise. With the naming of a new Superintendent of Tax Administration in 2005, a series of organizational changes in the Tax Administration of Guatemala began. The more important ones are listed below.

The first anti-corruption strategies were formulated to strengthen internal auditing actions with the creation of the Sub-Management of Special Investigations to carry out the following functions: (h)

Investigate, at the internal level, the action of SAT employees

and/or personnel with indications of having committed acts of corruption; (i) Assist the Public Ministry in the investigation of crimes and general errors perpetrated in prejudice to the interests of SAT;

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IV.3.3. PHASE III: Implementation of International Practices (2007 to date)

In order to complete the signing of the Integrity Pact and have it functioning in an Independent Center for Disagreements, SAT, launched an initiative to promote ethics in March 2007 in the framework of collaboration with the Canada Border Services Agency, holding “The First National Workshop on Ethics and Anti-Corruption.�

As a first phase of the initiative, a multidisciplinary representative group of employees carried out an analysis of present SAT efforts to promote ethics and combat corruption.

The analysis was conducted in accordance with the 10 elements of the WCO Revised Arusha Declaration, and the SAT Strategy of Ethics and Integrity was prepared as a result of the analysis. The objective was to present current advances in matters of Ethics, highlight deficiencies and propose solutions and concrete actions to promote ethics and combat corruption in SAT. This workshop was originally focused on the customs service but the impulse and enthusiasm of SAT’s highest authority caused it to be extended to the entire institution. Suggestions, observations and recommendations on the proposal were obtained in the spirit of undertaking an analysis of content, and a strategy was formulated.

When it was found that the Code of Ethics in effect was not known to the

personnel

and

did

not

meet

the

standards

of

the

best

international practices the first draft of a new Code was prepared.

The team that participated in The First National Workshop on Ethics and Anti-Corruption was given the task of visiting the different regions across the country to validate the proposed new Code of Ethics.

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To that effect, in the months of August and September 2007, meetings and workshops were held with many of the signatories of the Integrity Pact in the National Customs System, as well as with Institution workers in the Normative area, Central, Southern, Western and Northeastern Regional Managements. It was also submitted to the consideration of the SAT Management Committee. The sessions held were attended by Mr. Daniel Perrier, Director of Projects of the Canada Border Services Agency.

The observations were incorporated into the strategy and into the proposed new Code of Ethics. The strategy was approved by the Board of Directors, the maximum authority of SAT. Among other things, the campaign was designed to promote Institutional Ethics and to integrate ethics into the training programs. An Ethics module was incorporated into the following year’s operating activities.

The cycle begins with the Institution’s self-evaluation, identification of problems and possible solutions, the development of a plan of action, establishing verifiable

indicators of

performance, obtaining

the

backing of the senior management and implementing an action plan to begin the cycle all over again.

In the month of July 2007 the “Second National Encounter for Customs Modernization and Transparency” was carried out. In that event the strategic plan for Customs Modernization 2008-2011 was presented with the consent of the signatories of the Integrity Pact. Its principal lines of action were outlined within: •

Procedures, systems and procedures customs.

•

Customs Management.

•

Information and Communications Technology.

•

Infrastructure and Communication.

•

Cooperation and Association with Third Parties.

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In

October

2007,

the

Module 6

Superintendency

of

Tax

Administration

presented the Saqb`e institutional philosophy to various sectors and to the press media (Saqb`e is a Maya word that means white road or transparent). The philosophy is based on institutional values and continues to be the most efficient and transparent route to seeking excellence in all internal and external management activities. The changes began in the customs system, on the pillars of: Professional and Competitive Human Resources: trained and certified in Customs Administration; evaluated by means of tests of veracity;

uniformed

to

facilitate

identification;

working

under

guidelines with international standards and; interacting directly with importing and exporting enterprises by means of User Committees.

New

Computerized

Procedures.

Created

Customs by

SAT

Administration

personnel

with

the

System support

of

international specialists, the first tax administration to implement it in Latin America, with agility and less time in processing flows predesigned in the system to decrease opportunities for corruption.

Construction and Remodeling of Installations.

Customs Security based on Technology.

Then, in March 2008, an internal resolution was approved which relates to the “Rules that Create and Regulate the functioning of the Institutional

Committees

of

the

Superintendency

of

Tax

Administration,� the Sixth Section of which outlines the integration and functioning of the SAT Committee of Ethics and Integrity.

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On June 20, 2008, Board of Directors Accord Number 7-2008, approved the new “Code of Ethics and Conduct for the Personnel and Employees of the Superintendency of Tax Administration (SAT).“ The new code identifies and communicates the behaviors expected of SAT personnel and employees. It presents Institutional Values and addresses such themes as conflicts of interests, illicit enrichment, bribes and gifts, as well as the role of chiefs in the promotion of ethics. These new tools are reinforced with a letter of commitment signed by each functionary and employee, placed in his personnel file in the Human Resources Management.

The first phase of the Values Communication Strategy began immediately, with stickers placed in the elevators to promote responsibility and encourage following the good path, along with banners to be distributed to the regions that display messages changed every ten days.

The month of December 2008 saw the public presentation of the SAT Code of Ethics and Conduct, and its delivery to the Vice President of the Republic, (at that moment serving as President of the Republic in functions), as well as to State personnel as a demonstration of the Tax Administration’s commitment to the people of Guatemala to carry out

its

functions

with

ethics

and

transparency,

manifesting

institutional values.

In the year 2009, knowing the importance of keeping Institution personnel and employees informed, space was allocated for the consultation of documents related to the promotion of ethics and for consultation on the INTRASAT (internal means of communication) as well as on the WEB (www.sat.gob.gt).

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When the Public Information Access Law, Congress of the Republic Decree Number 57-2008 became effective, the Superintendent of Tax Administration issued a resolution designating the Taxpayer Legal and Rights Orientation Management Unit as SAT Public Information Unit.

This agency is responsible, among other established functions, for receiving and processing requests for information, orienting parties interested in its formulation, providing public information requested by interested parties for consultation or notifying denial of access.

At the end of May 2009, the INTRASAT published a survey of the personnel’s perception of the institution in matters of ethics.

Response was from 32% of the institution’s collaborators, thereby obtaining feedback that would translate into working activities for the year 2010, based upon needs expressed by the personnel. 45% of the surveys offered suggestions, asking for the promotion of ethics to continue by means of talks, videos, or other similar activities.

IV.3.4. Conclusions

SAT has undertaken a series of tasks for the purpose of promoting ethics and eliminating acts of corruption; however, many external factors still affect and limit the scope of the efforts and tasks addressed. One of these limitations is the generalised delinquency.

Corruption

has

unleashed

physical

and

verbal

threats

to

the

employees of the Intendancy of Customs, resulting in the death on an Administrator.

In spite of the vicissitudes, good practices have been constituted in working with signatories to the Integrity Pact in the National Customs System,

with

whom

joint

tasks

are

underway

to

promote

transparency and modernization of the Guatemalan customs.

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Promoting the practice of ethics at the institutional level has strengthened the institution. However, the team that has been leading this activity has not yet managed to bring in all the areas and persons affected because they do not have one hundred percent of their time available to dedicate to this task, but must carve out a space within all the functions they are responsible for in their daily work. This aspect has meant not being able to provide due follow up and update the strategy formulated in 2007.

The effective application of an ethics program follow up and control permits detecting violations and investigating information and/or denunciations, principally in regard to Customs area employees.

However, there has not been a sincere commitment on the part of authorities and personnel to carry out what has been established. It is important to mention that the Institution’s general policies must be consistent with its ethics policies. Otherwise, it is easy to see that credibility and effectiveness will not be lost. It is best not to forget that, in order for the principles and standards of ethics to be effective, they have to be assumed. Subsequent monitoring and control will be necessary for continuity, constancy and a decided will to adhere to practices, otherwise the strategy presented will not attain the objectives outlined.

IV.4. Case of Tanzania.

IV.4.1. Conditions Prior to the Establishment of the TRA

Corruption is not a new phenomenon in Tanzania. According to Mukandala (1983, p. 261), the public sector at the beginning of the 80s was “plagued with growing corruption and misappropriation of 120

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public funds.” Reports of the Auditor General from the early 80s show that this tendency continued (Semboja and Therkildsen, 1992, p.

1103). In the mid-90s, corruption in Tanzania was rampant in all sectors of the economy and politics (URT, 1996a). In the tax administration those problems were particularly disturbing, given the necessity of increasing tax revenue, but also to mitigate corruption in other parts of the public service.

A series of reports from as many commercial sources as officials documented extensive corruption and misappropriation of public funds. For example, the Confederation of Industries of Tanzania (CTI) estimated that the value of revenue lost in customs and sales taxes due to inefficient tax administration and errors in the classification and undervaluation of imported goods came to more than 250 billion TSh for the period March 1993 to March 1994 (Osorio et al., 1999, p.

5). According to ESRF (1996, p. 6), the official import statistics reported were as much as 70% below the value of imports. An indication of the breadth of this problem is that some types of textiles (including those used in the more popular type of vestment, the ‘khanga’) were sold in the mid-90s for 30% less than the customs duty value per meter of the cloth. Official statistics on revenue reported from customs duties also indicated enormous leakage.

Although the most commonly applicable customs duty on imports was 30% between 1988 and 1994, the customs duty generated revenue equivalent to less than 6% of the official value of imports during that period (Gandhi et al., 1995, p. 15).

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Evasion of other types of taxes was generalized as well. In the case of sales taxes the selective impost on the consumption of national goods, a common manner of evasion was to report lower production volumes (Osoro et al., 1999, p. 6). With respect to corporate taxes, underreporting of earnings and accusations of false tax deductions are common (Mwinyimvua, 1996). In both cases, this underreporting could be accomplished with or without the help of personnel within the Tax Administration.

In the case of the taxes on personal income, including the PAYE, i.e., “pay as you earn,” a method that employers utilize to evade taxes was not to report the taxes collected from employees to the tax authorities. Another was to pay the workers’ salaries and other compensation in cash “under the table.” But the discrepancies between potential and reported tax revenue could also be due to theft, pure and simple.

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For

example,

TCCIA

misappropriation administrators

of

(that

Module 6

(1995, taxes did

pp.

22-23)

collected not

by

implicate

reported tax

the

that

the

collectors

and

taxpayers)

was

generalized. The cause of this was a poor control routine in the Tax Administration. In some cases tax inspectors and auditors were also involved in the corruption. Evidence of the amount of taxes and tariffs lost to the Treasury was quite widespread. A report of the companies certifying pre-shipping inspections (PSI) evaluating cargoes prior to importing to Tanzania revealed that tax revenues lost to customs duties and unpaid in the fiscal year 1993 to 1994 amounted to 70 billion TSh (equivalent to US$ 134.5 million at that time) (The Indian Ocean Newsletter, No. 647, 19 of November of 1994, p. 1). In comparison, customs revenues recorded during that same year were 28.4 billion TSh (Gandhi et al., 1995, p. 10).

In other words, the revenues customs lost represented an amount 2.5 times greater than reported customs duties. This revelation led to the freezing of aid to Tanzania in November of 1994. Various important donors, including Norway and Switzerland, decided to withhold assistance while waiting for the results of investigations of what was assumed to be corruption involving top personnel. The Government promised a complete investigation.

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On February 23, 1995, the Office of the Comptroller and Auditor General presented its reports to the President. The reports exposed negligence and dishonest practices of high public personnel (The Indian Ocean Newsletter, No. 661, March 4, 1995, p. 1). Of the total amount of 70 billion TSh they could not justify, 20 billion TSh could be due to tax evasion by importers, while 50 billion TSh are due to tax exemptions. Of the latter, legal exemptions granted to public institutions and to public organizations, religious and humanitarian organizations constituted a large part, but in a good number of cases illegitimate exemptions are granted to various enterprises by the Ministry of Finance.

According to Osoro et al. (1999, p. 28), “the third program of the Customs Duties Law and a series of government notifications that permit exemptions were probably the least respected sections of the tax legislation.” In the Ministry of Finance the nickname for the Department of Revenues is “Department of Tax Exemptions.” In response to the Western donors’ pressures, the Minister of Finance, Kighoma Malima, was dismissed in the spring of 1995 and installed in a new ministerial position. In June of that year, he was forced to resign completely from the Government. The investigations also led to the dismissal of various high personnel in the Ministry of Finance, including the head of the Department of Revenues.

Corruption scandals in the tax administration were part of President Benjamin Mkapa’s decision to establish a Commission on the Causes of Corruption in Tanzania. The commission was named in January 1996 with the order to map out the scope of corruption in the country, and identify steps that would permit it to be resolved (URT, 1996a, pp. i-iii).

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Investigations identified four key factors to explain the scope and types of generalized corruption in the tax administration of Tanzania: •

Intervention policy. This took place generally in the form of discretional tax exemptions granted to entrepreneurs who were disposed to pay or had “appropriate connections” (URT, 1996a, pp.

307-311).

•

High

taxes

advantage

and

of

complicated

becoming

regulations.

involved

in

The

corruption

potential could

be

considerable for the personnel as well as for the taxpayers. The relatively high rates and a complex set of rules, in part incoherent, especially for corporate customs and taxes, resulted in great potential rewards for taxpayers who were disposed to bribe to have their tax load reduced and/or to accelerate the release of goods in customs (URT, 1996a, pp. 291-295,316-329). For customs personnel, the bribes that they accepted for releasing specific containers in the port of Dar es Salaam could correspond to as much as a year of salary. In general, the system gave considerable discretionary powers to the personnel.

•

Poor pay and working conditions. The salary levels in the tax administration in comparison with the private sector invited corruption. The average public employee had a salary that, including bonuses, in the beginning of the 90s was sufficient to cover only 40% of a family’s normal expenses (Mans, 1994, p.

378). In addition, working conditions were generally characterized by a lack of technical equipment and bad installations in the offices,

as

well

as

few

clear

recruitment,

promotion

and

compensation criteria (URT, 1996a, pp. 100-117, 281).

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Low probability of detection and punishment of corruption.

In great part, the internal audit and monitoring functions had become inoperative and non-efficacious (Cunningham, 1996; URT, 1996a, p. 50). For example, the operative internal audit unit in the Department of Customs in the principal Dar es Salaam office had only four employees at the beginning of 1996 and five for the entire Dar es Salaam region, which collected approximately 80% of all the customs revenue in Tanzania. Therefore, the internal auditing responsibility is subcontracted to Office of the Comptroller and Auditor General’s external auditors, which permanently detached

between

administration.

But

six

and that

seven of

persons

course

to

the

customs

compromised

their

independence and allowed collusion between auditors and tax personnel.

According to Cunningham (1996, p. 66), these auditors “were a part of the system and network of peers they had to inspect.” In addition, the audits were paralyzed by low capability. The auditing personnel lacked training in auditing and inspection methods, as well as the basic equipment and facilities required to exert control.

In practice, the probability of being detected and punished for corruption practically did not exist.

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Unit Summary

The Unit presented case studies showing the challenges, as well as the

strategies

safeguarding

and

integrity

initiatives and

implemented

fighting

corruption

geared

towards

within

customs

administration in three developing country contexts - the Cameroon, Guatemala, and Tanzania.

The Unit illustrated that the implementation and review of integrity programmes and policies are critical to overall improved institutional performance, and in the case of customs administration, to the achievement of national goals and objectives which are linked to increased resource mobilization (collection of taxes and duties).

The Cameroon Customs focused on integrity as part of its broad programme of reform and modernization, with an emphasis on measurement

and

quantification.

Strategies

included

computerization, as well as performance contracting (as advocated under the new public management approach to public sector reform).

Performance contracts, signed between the Director General and first line personnel in the Port of Douala, aimed at measuring the actions and behaviours of customs personnel. The objective was to ensure that all staff complied with the formal structure. Any break with agreed actions and formal rules could now be easily measured due to improved visibility, transparency and accountability. Tangible results of Customs integrity initiatives which focused on monitoring and measurement included reduced turnaround times for the dispatch of merchandise, increased productivity, as well as increased revenue yield.

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In Guatemala, the purpose of the programme implemented in the Superintendency of Tax Administration (SAT) was to increase personnel integrity, thereby reducing acts of corruption. The image and public perception of SAT was characterized as poor. It was possible to cite a number of examples of collaborators’ lack of ethics.

Integrity activities carried out were in accordance with the ten (10) points established under the WCO (Revised) Arusha Declaration. The creation of the new organic structure, SAT, was part of a conjunction of actions oriented to transforming and strengthening the country’s tax system. Actions which have permitted tax collections to increase in a sustained manner included the simplification of procedures, as part of a revised regulatory framework; increased transparency through ongoing publication of information; computerization; and strengthened internal controls through auditing and investigation.

Efforts

at

the

institutionalization

of

ethical

behaviours

were

undertaken over three (3) phases – Phase 1: Internal Efforts (19982004); Phase II: Rapprochement with the Private Sector (2005 & 2006); and Phase III: Implementation of International Practices (2007 to date).

The case of Tanzania and the Tanzania Revenue Authority (TRA) highlighted the nature and extent of corruption rampant throughout all sectors of the economy and politics, particularly so within the tax administration. Corruption was manifest in the evasion of duties and taxes, and high level of exemptions, a number of these resulting from inappropriate decisions reached as result of the high level of discretion inherent in the system. Corrupt practices flourished largely as a result of the highly interventionist nature of transaction processing, high taxes and complicated regulations, poor pay and working conditions, as well as the low probability of detection and punishment of corruption.

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Complementary Material DIFFERENT PHILOSOPHICAL CURRENTS Ancient Age This age is characterized by the thinkers’ attitude of astonishment toward nature, since it was believed that the world had always existed and not only the gods (immortals) but men (mortals) were a part of it. The two most outstanding philosophers of this age were Plato and Aristotle.

Plato faced the theme of ethics in various places and in different contexts.

So,

for

example, in his work “The Republic” deals with

individual

and

public ethics (from the perspective of justice Plato and Aristotle.

Fragment of “The School of Athens”. Raphael.

within jointly,

the with

soul) a

complex theory of State that finds complement and different points of vista in two other works, “Politics” and “Laws.”

The school of Athens. In the image, 19 detail of The School of Athens (1510-1511), one of the more famous frescos that Rafael painted to decorate the rooms of the Vatican. Plato and Aristotle dominate the immense fresco engaging in a dialog and each of them holding one of his works (The Timeo and ethics); in the rest of the of fresco are represented other philosophers and erudite Greeks.

19

www.biografiasyvidas.com

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Plato established dualism in the manner of knowing since, according to his proposal, our senses show us a distorted reality. Basing himself on that, Plato concluded that our beliefs and prejudices are no more than the chains that tie us to the senses, which confuses us and shows us a distorted world, distracting us from our true purpose: visualizing and understanding the World of the Ideas.

Aristotle points out that the most important virtues are those of the soul, principally those which refer to the rational part of the man, dividing the rational part in two: the intellect and the will. When the intellect is well disposed to that to which his nature points, that is, toward the knowledge or possession of the truth, we say that intellect is virtuous and good. The intellectual virtues perfect man in relation to knowledge and the truth and they are acquired by means of instruction. Through the virtues, man dominates his irrational, surely Aristotle’s most important statement on ethics, based on the premise that all humans seek felicity.

Plato And Aristotle “Virtues�

Felicity consists of activity of soul, and the most perfect felicity is attained by means of the most perfect activity, the intellectual.

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"To say that felicity is best appears to be something unanimously recognized, but, all things considered, it is desirable to explain what it is with more clarity. Perhaps it could be found, if it is possible to capture the function of man. In effect, as in the case of a flutist, a sculptor or any artisan, and those in general who realize some function or activity, it appears that the good and the well being are in the function, as it also occurs without doubt, in the case of man, if there is some function that is appropriate to him." 20

"Virtue being actually of two species: intellectual and moral, the intellectual should above all be teaching its birth and development, and he therefore needs experience and time, inasmuch as moral virtue (ethics) is the fruit of customs (éthos), from which it has taken its name by a slight inflexion of the word (éthos)." 21

Medieval Age It was a moment in which ethics assumed elements of the classical doctrines of felicity (the purpose of human action consists of obtaining the good that makes us happy) and it ties them to Christian doctrine (seem as divine Revelation), especially according to the standards collected in the commandments.

Platón. República Libro VII 517c. Breve análisis de los libros V-VII de la República Mauricio Cubaque M. Licenciado en Filosofía (Universidad Pontificia Javeriana)

20

21 "Ética a Nicómaco", libro 2,1. Fuente: http://www.webdianoia.com/aristoteles/aristoteles_etica.htm of Google

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Under this perspective the only thing that exists by its own right is God and ultimate purpose of human action is charity, to manage to live by the Gospel, and that allows man to accede to the vision of God (in

heaven),

where

the

human

being

reaches

his

maximum

abundance and the supreme good. The two great philosophers of this age were Saint Augustine of Hippo and Saint Thomas of Aquinas (especially in the second part of the Summa Theologiae, which gathers numerous elements of Aristotle’s ethics) 22.

Modern Age In a general way this stage is characterized by emphasizing doubt as the distrusting and exigent attitude of the philosopher in search of certainty, man being the most important. That is how modern ethics work seeing the old world (Plato, Aristotle), and thinker like Descartes identify in his famous “Discourse of Method” some elements of ethics, but the great revolution, modern ethics was realized through Immanuel Kant, who rejected founding ethics on anything other than moral imperative itself, since if morals are oriented to seeking felicity they could give no categorical or universal standard. If then the world of duty be based upon which the bases of moral conduct are established, then only free, voluntary and autonomous acts belong to the moral world. In this scope of duty being is where ethics has been installed. It rests on human liberty. Freedom is the condition of possibility of moral conduct and ethics.

22

segunda parte de Tomás of Aquino. Summa Theologiae. http://hjg.com.ar/sumat/index.html.

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IMMANUEL KANT “Duty” Not in this world, nor in general outside the world either, is it possible to think anything that could be considered as good without restriction, unless it is only good will Foundation

of

the

metaphysics

of

customs10.

Contemporaneous Age Ethics of the 20th Century has known important contributions on the part of numerous authors: the vitalists and existentialists develop the sense of option and responsibility, Max Scheler spoke of the distention between values and goods and ends, since for him values would constitute a special sphere of the essences, therefore there are no values because there are goods and ends (that would be what Saint Thomas of Aquinas would say), nor are there values because there are standards (as Kant would say), but values would be independent of things, they would be in a different sphere, things are and values value. Authors like Alain Badiou have attempted to demonstrate

that

this

principal

tendency

(in

opinions

and

in

institutions), the question of "ethics" in the 20th Century, is in reality a "true nihilism" and "a threatening denial of all thought." 23

23 Badiou, Alain (1993). La Ética. Ensayo sobre la conciencia del Mal. http://www.elortiba.org/badiou.html.

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MAX SCHELER “Values” Values are present in things or in goods and are not independent obstructions neither the one nor the other.11

All in the life has a process and evolution and the subject of ethics is not an exception since as we have been able to appreciate during the different stages of history in spite of different philosophical currents existing, as Doctor José Manuel Canales puts it so well 24, the common elements of the distinct ethics of maximums and minimums, of proposals of a happy life are rescued, and are a conjunction of values that the citizens members of a society share, whatever their conceptions of a happy life and its life projects. Therefore it is important to emphasize that the values of ethics in the public function should always be routed to seeking efficiency, the professionalism, objectivity, the common good and the sensitivity that citizens are the center of reference of their activity. 25

24

Op.cit VII Congreso Internacional del CLAD sobre la Reforma del Estado y de la Administración Pública, Lisbon, Portugal, Oct 8-11. 2002 25

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Bibliography •

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•

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•

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•

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•

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•

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•

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