Volume 14 Number 3
No to Taxfree Backhanders
01 June 2001

When Norwegian doctor Sturla Johnson discovered that bribery was tax deductible, he felt he had to do something.

Until 1980 corruption was not much discussed in the Scandinavian countries. There were occasional reports such as the Bofors scandal, when a Swedish arms manufacturer paid around US$200 million in bribes to get contracts in India. But most people thought corruption was something that happened in other parts of the world and Scandinavia's hands were fairly clean.

At the height of the 1980s oil exploration in the North Sea, cases of Norwegian exporters paying large bribes began to come to light. An executive in the Norwegian state oil company was convicted after having accepted bribes from a German steel pipe manufacturer.

In 1988 the press reported that the Norwegian authorities were giving tax deductions on bribes Norwegian companies had paid in developing countries. The argument was that, as bribery was 'unavoidable' and 'part of the culture' in some countries, payments used to obtain contracts should be regarded as regular expenses.This information made me really angry and I remember thinking: 'This has gone too far. I must do something.' I wrote a strong letter of protest to the Norwegian Minister of Finance. Four of my friends, who like me had worked in developing countries, also signed the letter. We stated that bribery was totally unacceptable and that to make it tax deductible was to condone an immoral and harmful practice. The Minister replied that he would look into the matter.

At just that time, unknown to me, Norwegian State Television (NRK) was setting up a TV panel discussion on bribery and was looking for a participant who would speak against it. The Finance Ministry gave them my name and they got in touch with me. I agreed to take part and suggested that the programme should also include someone from Africa. The producer arranged an interview with a Nigerian friend of mine who was visiting Oslo, and this appeared as part of the one-hour programme.

The members of the panel were the Director of Taxation, four prominent businessmen, a politician and me. The programme revealed some shocking attitudes and business practices, and I found myself almost alone in rejecting bribery. Over the following days there was a lot of media interest and the matter was taken up in a parliamentary question to the Minister of Finance. A few weeks later, he announced that he was ending tax deduction for bribes and this became law two years later. Denmark introduced similar legislation in 1998 and Sweden followed suit in 1999.

In recent years there have been important developments on the international level, which suggest a change of attitude towards corruption. In 1993 the Organization for Economic Cooperation and Development (OECD) asked member states to stop tax deduction for bribes, and a working committee of the European Union has made a similar recommendation. In 1999 an OECD Convention made bribery a criminal offence, and the European Council has also prohibited it. For the last 20 years, American companies who pay bribes in foreign countries have been liable to criminal prosecution.

The World Bank has also joined the battle. In its 1997 World Development Report it concluded that corruption blocks development in poor countries. For instance, it stated, corruption makes the judiciary unpredictable, skews recruitment towards connections rather than qualifications and twists political decisions.

Transparency International (TI), an NGO founded in Germany in 1993, now has chapters in 77 countries and keeps a close watch on corruption worldwide. In 1999, the Norwegian Minister of Development Aid and Human Rights, Hilde Frafjord Johnson, announced that her government wanted to cooperate closely with TI and that in the future Norwegian aid would be conditional on recipient countries tackling corruption effectively. 'Corruption is one of the most formidable blocks to development,' she said.

I believe that laws and conventions are essential but not enough. Each of us can find ourselves in situations where there is a danger of being bought. For instance, on one occasion a computer salesman offered me a gift of software as he was leaving my office. I was tempted to accept, because it was something I badly needed for my own computer. But in the end I refused. The man was hoping to sell personal computers to the people working in my department. Saying no freed my hands to choose the supplier who gave us the best offer.

As a doctor, I am conscious that at times the relationship between my profession and the pharmaceutical industry has been too close. The industry sponsors medical meetings which are important to us doctors. On our side, our choice of the drugs we prescribe to our patients affects the industry's profits. The industry has tried to influence us by offering us trips, expensive dinners and books, and we have happily accepted.

In 1998, the Norwegian Medical Association and the pharmaceutical industry got together to straighten things out. Certain doubtful practices were stopped and things are now in the open. These days, when the pharmaceutical industry sends out invitations to lectures and seminars, they are accompanied by a standard letter stating clearly what is and is not included.
Sturla Johnson

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