- Risk key
- Low
- MODERATELY LOW
- MODERATE
- MODERATELY HIGH
- HIGH
Judicial System
The Italian judicial system carries a moderate risk of corruption. Businesses perceive that bribes or irregular payments in return for favorable judicial decisions sometimes occur (GCR 2015-2016). The judiciary is strongly autonomous and government interference is limited (SGI 2017). However, over half of businesses and citizens indicate that they perceive the independence of courts and judges as fairly limited or very limited (JS 2017) and one-quarter of citizens believe that abuse of power and bribery are widespread among the courts (JS 2017; EB Feb. 2014). Nearly half of Italian judges indicate they strongly believe that judges are being promoted on basis other than ability and experience (ENCJ 2017). About a third of judges believe that the government does not respect their independence (ENCJ 2017).
Businesses rate the efficiency of the legal framework for settling disputes and challenging regulations as among the poorest in the world (GCR 2017-2018). The Italian courts are notoriously slow, but the civil legal system meets the generally recognized principles of international law (ICS 2017). The main problem faced is the heavy backlogs which may reduce the effectiveness of the judiciary (SGI 2017). Italy has installed special “business tribunals” which adjudicate certain business disputes such as shareholder disputes and intellectual property dispute, generally in less than a year (ICS 2017). Enforcing a contract takes on average over three years, which is twice as long as the OECD high-income average (DB 2018). Italy is a state party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and a member of the International Centre for the Settlement of Investment Disputes (ICSID).
Police
The Italian police force poses a moderate corruption risk. Companies report moderate confidence in the reliability of the police forces (GCR 2017-2018). One-third of surveyed citizens believe that bribery and abuse of power are common among police officials (EB Feb. 2014). Authorities have established effective mechanisms to investigate abuse and corruption among police forces, yet long delays by courts and prosecutors impede investigations (HRR 2016).
Public Services
There is a moderate to high risk of encountering corruption in Italy’s public services sector. Irregular payments and bribes when dealing with public services are not very common (GCR 2015-2016). One-third of surveyed households believe that local government officials are corrupt, and almost half of citizens believe that bribery and abuse of power for personal gain are common practices among public officials issuing business permits (GCB 2016, SE 2014). Nearly two-thirds of businesses indicate that they see patronage and nepotism as a problem in Italy (Flash Eurobarometer 2015).
Inefficient government bureaucracy is the most cited problematic factor for doing business in Italy; in fact, Italy is ranked among the worst countries in the world when it comes to the burden of government regulation (GCR 2017-2018). Over four out of five businesses indicate that they perceive the complexity of administrative procedures and fast-changing legislation and policies as a problem (Flash Eurobarometer 2015). The government is generally careful to act according to existing legal regulations, but legal certainty is impeded by inconsistent and frequently changing regulations (SGI 2017). Starting a company in Italy is less time-consuming, yet more costly compared to the OECD average (DB 2018). Dealing with construction permits is significantly more time-consuming than in other OECD high-income countries (DB 2018).
Land Administration
There is a moderate risk of corruption in Italy’s land administration. More than half of citizens believe that abuse of power and bribery are widespread among officials issuing building permits (EB Feb. 2014). Companies express insufficient confidence in the protection of property rights (GCR 2017-2018). Property rights are well defined in Italian courts; however, slow court proceedings cause delays in enforcement (ICS 2017, SGI 2017). Expropriation in return for full compensation is allowed under Italian law (ICS 2017). A high number of cases in the judiciary and reports in the press indicate that corruption is high in the area of local building permits (SGI 2017). The land register system is antiquated and in need of reform, leading to inequities in the property tax system (SGI 2017). Registering property in Italy is less time-consuming compared to other OECD high-income countries (DB 2018).
Corruption in Italy’s construction sector is said to be rampant; about one in six buildings is said to be constructed illegally (The Guardian, Aug. 2016). Widespread corruption in the construction sector is also said to be part of the cause why a high number of buildings collapse in Italy when earthquakes strike (The Guardian, Aug. 2016).
Tax Administration
The tax administration in Italy poses a high risk of corruption. Bribing tax authorities has been identified as one of the most recurring corruption offenses (ICS 2017). Likewise, companies report that bribes and irregular payments are widespread in meetings with tax officials (GCR 2015-2016). Almost all companies operating in Italy identify tax rates as a problem (European Commission, Feb. 2014). More than a quarter of surveyed households perceive most or all tax officials to be corrupt and more than one-third of citizens report that abuse of power and bribery are widespread among tax officials (GCB 2016, EB Feb. 2014). The tax structure in Italy can be unpredictable (ICS 2017). Some investors have expressed concerns that the Italian Revenue Agency is targeting large foreign companies (ICS 2017). These investors allege that investigations may focus on corporate accounting practices deemed legitimate in other EU Member States, thereby creating uncertainty and inconsistency (ICS 2017). Paying taxes in Italy takes a few more steps and requires significantly more time than the OECD high-income average (DB 2018).
Italian authorities have been unable to reduce the very high levels of tax evasion and the size of the black economy (SGI 2017). These problems have significantly distorted the economy and benefited non-compliant individuals and businesses (SGI 2017). The European Commission estimates that nearly a quarter of VAT is evaded and not collected, costing Italy nearly EUR 35 billion in 2015 (ECVG 2017).
Customs Administration
The customs administration poses moderate corruption risks to businesses operating in Italy. Bribes and irregular payments occasionally happen in customs procedures (GETR 2016). Companies are generally satisfied with the time predictability and efficiency of the clearance process (GETR 2016). Burdensome import procedures and tariffs and non-tariff barriers are frequently cited problems (GETR 2016). Companies spend less time on import and export documentary compliance than elsewhere in the region (DB 2018).
Public Procurement
There is a high risk of corruption in Italy’s public procurement sector. Most corruption cases in recent years have involved government procurement (ICS 2017). Companies perceive favoritism in decisions by government officials to be very widespread (GCR 2017-2018). Diversion of public funds is also perceived to be widespread (GCR 2017-2018). Over a third of companies believe that corruption has prevented them from winning a public procurement contract (European Commission 2014). Bribes are irregular payments are perceived to be widespread in the process of awarding public contracts and licenses (GCR 2015-2016). Foreign investors have complained of a lack of transparency and complicated bureaucracy in procurement procedures (ICS 2017). An annual report released by the Financial Guard of Italy revealed that the cost of fraud and waste amounted to EUR 5.3 billion in 2016, including EUR 3.4 billion that may be attributed to irregularities in public contracts (ANSA, Mar. 2017).
In 2016, a review by Italy’s anti-corruption authorities found that Consip, the government’s public procurement agency, had assigned nearly two-thirds of public facility maintenance contracts known as FM3 and FM4 to just two companies (ICS 2017). Alfredo Romero, the owner of one of the two companies involved was arrested in February 2017 for allegedly illegally trying to corrupt Consip executives (ICS 2017). Companies are recommended to use a specialized public procurement due diligence tool to mitigate the corruption risks related to public procurement in Italy.
Natural Resources
A large Italian steel industry owned by the Riva family is being investigated for environmental pollution and criminal association to commit environmental offenses. The company has been accused of releasing cancer-inducing toxins into the air, and wire-tap evidence cited by the prosecution claims senior executives tried to bribe officials to cover up environmental hazards at the plant (Bloomberg, Jan. 2013). Adriano Riva was handed a two-and-a-half-year term in 2017 (The Local, May. 2017). Over EUR 1,3 billion held by Riva in accounts in Jersey and Switzerland were returned to Italy (ITV, Jun. 2017).
Legislation
The Criminal Code of the Italian Republic criminalizes extortion, active and passive bribery, bribing a foreign public official, fraud and money laundering. Penalties for individuals bribing public officials include imprisonment of up to ten years (bribing a judge carries a maximum penalty of twenty years imprisonment), confiscation of goods, and other penalties including a ban on negotiating with public entities (CMS 2016). When bribes are committed on behalf of a company, the company may be fined up to EUR 1.2 million, debarred from bidding on public tenders, assets may be confiscated, and the company risks having its judgments published (CMS 2016). The anti-corruption framework was last strengthened in 2015, by increasing the scope and punishment of corruption offenses, criminalizing trading in influence in the public and private sectors, and modifying the statute of limitations. It also gives more investigative powers to the National Anti-Corruption Authority (CiVIT), increases whistleblower protections, enhances transparency in public contracts, and bans officials found guilty of corruption from holding certain administrative posts (Lexology, Aug. 2017). Facilitation payments are forbidden (GLI 2017). Gifts are in principle considered bribery, but small gifts deemed a “commercial courtesy” received without conflicting with the responsibilities of the officeholder should be excluded from criminal responsibility (GLI 2017). Various government departments have their own limits on the maximum value of gifts that may be accepted; the general code of conduct for employees of the public administration puts the limit at EUR 150 per gift (GLI 2017). The Code of Conduct of Public Officials (in Italian) includes detailed provisions on transparency, conflicts of interest and gifts. It requires elected and appointed officials at central, regional and local levels – including those who carry out temporary tasks on behalf of public authorities, as well as their relatives – to declare assets (EUACR 2014). Italy’s parliament is discussing a draft whistleblower protection; changes can be expected in the near future (Lexology, Aug. 2017).
Italy is a signatory to the OECD Anti-Bribery Convention, the United Nations Convention Against Corruption (UNCAC) and the Council of Europe’s Civil and Criminal Law Conventions against Corruption.
Civil Society
Freedom of expression is guaranteed by the Constitution of the Italian Republic, and is in most cases respected by the government (HRR 2016). Conflicts of interest between political parties and media owners is a serious obstacle to effective freedom of press (FotP 2017). Media ownership is highly concentrated in Italy; in practice laws that stipulate that no broadcaster is allowed to control more than twenty percent of television and radio stations are circumvented (FotP 2017). Freedom of information is not regulated by the Italian constitution or other laws, and it can take several years before journalists obtain information (FotP 2017; HRR 2016). Physical threats or attacks against journalists occasionally come from organized crime networks or other political or social groups (FotP 2017). Italy’s press freedom is rated as ‘partly free’ (FotP 2017).
The constitution guarantees the freedoms of assembly and association and these rights were generally respected by the government (HRR 2016). Italy is part of the Open Government Partnership, which further strengthens the collaboration between the government and civil society (FitW 2016).
Sources
- World Bank: Doing Business 2018.
- World Economic Forum: Global Competitiveness Index 2017-2018.
- US Department of State: Investment Climate Statement 2017.
- Bertelsmann Stiftung: Sustainable Governance Indicators – Italy Report 2017.
- European Network of Councils for the Judiciary: Independence, Accountability and Quality of the Judiciary, Performance Indicators 2017.
- CASE: VAT Gap Reports and Study in the EU-28 Member States 2017.
- European Commission: EU Justice Scoreboard 2017.
- Freedom House: Freedom of the Press 2017.
- Global Legal Insights: Bribery & Corruption 2017.
- Lexology: “Anti-Corruption and Bribery in Italy”, 3 August 2017.
- ITV: “Jersey Assists in the Return of Over EUR 1.3 Billion to Italy”, 12 June 2017.
- The Local: “Italian Steel Magnate to End Up Behind Bars”, 25 May 2017.
- ANSA: “Fraud, Waste Cost State 5.3bn in 2016”, 16 March 2017.
- World Economic Forum: Global Enabling Trade Report 2016.
- US Department of State: Human Rights Practices Report 2016.
- Freedom House: Freedom in the World 2016.
- CMS: Guide to Anti-Bribery and Corruption Laws 2016.
- Transparency International: Global Corruption Barometer 2016.
- The Guardian: “Italy Earthquake Throws Spotlight on Lax Construction Laws”, 24 August 2016.
- World Economic Forum: Global Competitiveness Report 2015-2016.
- European Commission: Eurobarometer Businesses’ Attitudes Towards Corruption in the EU 2015.
- The Guardian: ‘Expo 2015 in Milan is – for the hopeful – a sign that Italy is back on its feet’, 29 April 2015.
- Aljazeera: ‘Italy report shows rampant public sector corruption’, 9 April 2015.
- European Commission: Special Eurobarometer 397, Feb 2014.
- European Commission: Flash Eurobarometer 374 – 2014.
- European Commission: The EU Anti-Corruption Report – Italy 2014.
- Bloomberg: ‘Italy’s Riva Steel Billionaires May Close Largest Factory’, 18 January 2013.
