Austria Corruption Report

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Snapshot

Corruption does not significantly hinder business in Austria, but there is a moderate risk of corruption in public procurement. The Austrian Penal Code (in German) criminalizes attempted corruption, active and passive bribery, bribery of foreign officials and politicians, extortion, fraud, embezzlement and money laundering. The government has generally implemented anti-corruption laws effectively, but some high-level corruption cases have dragged on for many years. Facilitation payments are criminalized, and it is very uncommon for companies to make irregular payments or bribes in the country. Gifts are not permitted, but gifts with a value of less than EUR 100 are generally not scrutinized.

  • Risk key
  • Low
  • MODERATELY LOW
  • MODERATE
  • MODERATELY HIGH
  • HIGH
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Judicial System

There is a low risk of corruption in Austria’s judiciary. Bribes and irregular payments in return for favorable judgments are rare (GCR 2015-2016). Companies report sufficient confidence in the independence of the judiciary (GCR 2017-2018); about two-thirds of businesses perceive the independence of judges to be fairly good or very good (ECJS 2017). Companies report moderate confidence in the legal framework’s efficiency for settling disputes, yet report insufficient confidence in its efficiency pertaining to challenging regulations (GCR 2017-2018). Only a small fraction of judges report having faced inappropriate pressure in the course of their work (ENCJ 2017). A third of judges believe that some judges have been promoted on basis other than merit or experience (ENCJ 2017). Courts have successfully prosecuted highly connected persons (SGI 2017). There is no special treatment of foreign investors in Austrian courts (ICS 2017). Austrian arbitration law largely conforms to the UNCITRAL model, but diverges in that awards may be set aside if the arbitral procedure is not in accordance with Austrian public policy (ICS 2017). The rationality and professionalism of proceedings is highly dependent on the particular judge in charge, considering that many, particularly first-instance courts, lack the necessary training to meet the standards expected of a modern judicial system (SGI 2017). Austria has an office of prosecutors fighting political corruption who, unlike other prosecutors, have partial independence from the Ministry of Justice in a bid to give them more capabilities to fight corruption (SGI 2017).

The time required to enforce a contract is significantly shorter compared to the OECD high-income average (DB 2018). Austria is a member of the International Centre for Settlement of Investment Disputes (ICSID) and is a signatory to the New York Convention 1958, on the Recognition and Enforcement of Foreign Arbitral Awards.

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Police

Corruption is not a problem within the security services in Austria, and businesses express high confidence in the police to uphold the law (GCR 2017-2018). Government and civilian authorities carry out effective control over the police, and effective mechanisms are maintained to investigate and address corruption (HRR 2016). Roughly one in seven of Austrians believe corruption within the police is widespread (Eurobarometer 2017).

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Public Services

Corruption in the public services sector is a moderate to low risk. Irregular payments and bribes in the public services sector are very rare (GCR 2016-2016). More than one-third of businesses perceive nepotism and cronyism to be widespread within the public administration, and that bribery and the use of connections are often the easiest way to obtain certain public services (European Commission, Feb. 2014). A quarter of Austrians indicate they still consider it acceptable to offer a gift or a favor in order to obtain something from a public service (Eurobarometer 2017). A third of citizens believe that abuse of office and bribery are widespread among officials issuing business permits (Eurobarometer 2017). Companies perceive inefficient bureaucracy as a competitive disadvantage for the country (GCR 2017-2018). The regulatory, legal, and accounting systems are generally transparent and consistent with international norms (ICS 2017). Government actions are generally self-binding and predictable, and there is broad acceptance that government institutions must respect legal norms passed by parliament and monitored by the court systems (SGI 2017). The government employs a preventive approach towards the issue of corruption in the public administration (EUACR 2014). The government has initiated reform projects that include the establishment of one-stop-shops and e-government to minimize encounters between public officials and citizens/companies, and thus decreasing the risks of corruption.

Starting a business in Austria takes significantly more steps and more than double the time required elsewhere in OECD high-income countries (DB 2018). Dealing with construction permits takes significantly longer than the OECD high-income country average (DB 2018).

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Land Administration

There is a low risk of corruption in Austria’s land administration. Businesses express confidence in the government’s ability to protect property rights and property rights are effectively upheld by the judiciary (GCR 2017-2018; ICS 2017). Businesses must register with the electronic land registry for any real estate agreement to enter into effect (ICS 2017). The land registry has proven to be a reliable system (ICS 2017). Expropriation of private property is rare and requires special legal authorization for public purposes (ICS 2017). Expropriation is non-discriminatory towards foreign investors (ICS 2017).

Registering property in Austria takes only three steps and takes approximately the same time as the OECD high-income average (DB 2018).

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Tax Administration

Corruption is not a problem in Austria’s tax administration. Bribes and irregular payments rarely occur in meetings with tax officials (GCR 2015-2016). Austria has established an attractive corporate tax model with a relatively low corporate tax rate (ICS 2017). Nonetheless, businesses rank tax rates and tax regulations among the factors constituting a competitive disadvantage to doing business in Austria (GCR 2017-2018). Companies make more frequent tax payments, but spend slightly less time on paying taxes compared to the OECD high-income average (DB 2018).

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Customs Administration

The border administration in Austria is transparent and carries a low risk of corruption. Companies indicate that bribes and irregular payments during customs procedures are rare (GETR 2016). Companies express satisfaction with the time-predictability and efficiency of the clearance process (GETR 2016). Burdensome import procedures are cited as the most problematic factor for importing into Austria (GETR 2016).

The time and costs required for border compliance are negligible compared to the OECD high-income average (DB 2018).

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Public Procurement

There is a moderate risk of corruption in Austria’s public procurement sector. Bribes and irregular payments in the process of awarding public contracts and licenses are fairly uncommon (GCR 2015-2016). Businesses perceive favoritism in decisions of government officials as common, but diversion of public funds is perceived as fairly uncommon (GCR 2017-2018). The most cited risk of corruption in public procurement is the evaluation criteria being tailor-made for certain participants (EUACR 2014). Companies believe that close links between politicians and businessmen has led to corruption (European Commission, Feb. 2014), and almost half of surveyed citizens believe that bribery and abuse of power are widespread among procurement officials (European Commission, Feb. 2014). The lack of a solid Freedom of Information Act means that there is little transparency when it comes to obtaining a comprehensive picture of procurement spending (GDACI 2015). A shortage of transparency within defense procurement is identified through the lack of disclosure on purchases and of a systematic procurement strategy, and procurement agents and subcontractors are found to be insufficiently controlled (CESifo Dice, 2013).

Allegations of major irregularities in the EUR 2 billion sale of 18 Eurofighter jets by airplane manufacturer Airbus to Austria have surfaced (FT, Oct. 2017). It is alleged that Airbus made illegal payments to politicians, civil servants, and other parties in order to win the deal (FT, Oct. 2017). Airbus is facing separate inquiries from Austrian and German prosecutors (FT, Oct. 2017).

Austria’s former finance minister Karl-Heinz Grasser is standing trial on charges of bribery and embezzlements along with fifteen other former high-ranking politicians (US News, Dec. 2017). The charges are related to the privatization of public housing company Buwog in 2004 (US News, Dec. 2017). The tender was allegedly tampered with to favor the bidder who then paid millions of euros in commissions to Grasser’s associates (US News, Dec. 2017).

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Legislation

The Austrian Penal Code (in German) criminalizes attempted corruption, active and passive bribery, bribery of foreign officials, extortion, fraud, embezzlement and money laundering. Facilitation payments and gifts are prohibited, but gifts up to EUR 100 are generally not considered an “advantage” (GLI 2017). Bribery of foreign officials by an Austrian national, company or partnership incorporated in Austria is also illegal (CMS 2016). The government generally implements the legal anti-corruption framework effectively (HRR 2016), and efforts to prosecute foreign bribery have been increased (OECD 2015). Corporations are liable for active and passive criminal offenses if the offense was committed by an employee for the benefit of the organization or in breach of the organization’s duties (GLI 2017). Penalties for companies include fines up to a maximum of EUR 1.8 million (GLI 2017). An anti-money laundering system contained in various laws criminalizes money laundering. The Federal Bureau of Anti-Corruption (BAK) has jurisdiction over corruption investigations taking place within and outside the country. Disclosure laws are effectively enforced and complied with (HRR 2016). Lobbying is regulated by the Lobbying Act, and political donations exceeding EUR 3,500 must be reported (ICS 2017). There is no specific whistleblower protection legislation, but employees in the financial sector are granted some protection under the Austrian Banking Act (WLG 2016). A code of conduct has been provided for all levels of public administration (EUACR 2014). Intergovernmental anti-corruption group GRECO has repeatedly criticized the absence of a strong code of conduct or criminal provisions to regulate conflicts of interests among parliamentarians (GRECO 2017).

Austria is party to the UN Convention against Corruption, the Civil Law Convention on Corruption, the Criminal Law Convention on Corruption and the OECD Anti-Bribery Convention. Austria’s Penal Code is in-line with the OECD Anti-Bribery Convention, and jurisdiction extends to all offenses committed by Austrians regardless of whether the bribe was illegal in the foreign jurisdiction, and whether it was offered, promised or paid (EUACR 2014).

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Civil Society

Freedoms of speech and press are guaranteed in Austria and respected in practice (HRR 2016). Strict defamation laws and weak access to government information remain concerns (FotP 2016). These laws discourage reporting of governmental abuse; many observers believe the ability and willingness of police to sue for libel or slander discouraged individuals from reporting police abuses (HRR 2016). Media ownership is concentrated, thereby restricting the diversity of reporting (FitW 2016). Austria’s media environment is considered ‘free’ (FotP 2017).

The Austrian Constitution and certain laws protect freedoms of assembly and association, and these rights are respected in practice (HRR 2016). NGOs are well developed and function as a reliable partner in policy making (FitW 2016).

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Sources

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