Germany, Where Bribery Is Tax Deductible

Guess which country permits bribes in private business to be tax-deductible? Try Germany. While rarely used--the deduction requires names to be named--the fact that bribery is legal in Germany flies in the face of its international reputation for law and order.

As corruption cases go, the ongoing Adan Opel affair is typical. Dozens of employees at the General Motors Corp. unit allegedly secured kickbacks from suppliers who help build their plants. Three executives are suspected of accepting such favors as construction work on their homes.

But the scandal has hit a raw nerve. Ordinary Germans are getting fed up with cozy practices that enrich a few while they struggle with rising taxes and job jitters. Business as usual doesn't cut it anymore.

Germany is by no means awash in systemic corruption, with judges and pols on the take and a price on anything. Rather, fuzzy lines are crossed in the routine of doing business. Journalists, for example, think nothing of accepting air tickets and hotel rooms from the companies they are covering.

The outcry against corruption is striking a chord now more than ever as Germany struggles to define its future economy. To help its companies and banks compete, it is trying to make its business practices more transparent. That has led to a crackdown on tax evasion and insider trading and to steps to boost shareholders rights, disentangle banks from large corporate shareholdings, and slash the jungle of regulations governing even store hours.

Some steps are obvious: End the bribery deduction, stiffen penalties, strengthen corporate oversight. Changing behavior patterns won't be easy. But with bribes and cartel-like pricing adding 20% to 30% to public contracts alone, the payoff from clearer rules and aggressive enforcement will tally up fast.

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