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Corruption does not represent a major obstacle for business operating or planning to invest in Taiwan. However, there are several reports of official corruption. These can be traced back to the close ties between politics and business which have raised the risks of corruption particularly in public procurement. Petty corruption, however, is very uncommon in most sectors. Taiwanese anti-corruption law is primarily contained in the Anti-Corruption Act, the Criminal Code and the Organic Statute for Anti-Corruption Administration and the government generally implemented these laws effectively. Taiwan’s Agency Against Corruption defines low-level gratuities; therefore, any facilitation payment could be viewed as a bribe by the courts.
Last updated: September 2016
The judicial system presents businesses with moderate corruption risks. Bribes and irregular payments are occasionally exchanged in order to obtain favorable court decisions (GCR 2015-2016). The judiciary suffers from political interference and the impartiality of judges is apparent when it comes to settling high-profile and politically sensitive cases (BTI 2016, HRR 2015). More than half of surveyed citizens perceive the judiciary to be corrupt (GCB 2013). On a more positive note, and in an effort to contain corruption within the courts, Taiwan established a rating and removal system for monitoring corrupt judges (FitW 2013). Businesses find the courts’ ability to settle disputes and challenge government regulations as poor (GCR 2015-2016).
In one corruption case, former president Chen Shui-bian and his wife were convicted on corruption and money laundering charges. Chen Shui-bian was sentenced to 18 years’ imprisonment in addition to the 17 years he is already serving for corruption. His wife has received over 19 years in prison and a fine of USD 5.45 million (ICS 2013).
Companies do not contend with high corruption risks when dealing with the police. Business executives believe Taiwan’s police services can reliably enforce law and order (GCR 2015-2016). There are effective mechanisms in place to investigate and punish abuse and corruption (HRR 2015). There were no reports of police impunity during 2015 (HRR 2015). Notwithstanding, the police is perceived as one of the most corrupt public institutions by more than half of surveyed Taiwanese households (GCB 2013).
Corruption in the public services does not present businesses with high risks. Companies rarely report having to pay bribes to officials to obtain public utilities (GCR 2015-2016). In effect, reports of corruption cases in the bureaucratic apparatus are rare (BTI 2016). Nonetheless, inefficient government bureaucracy is ranked as the second-most problematic factor for doing business in Taiwan (GCR 2015-2016). Likewise, the burden of government regulations is also perceived as problematic to doing business (GCR 2015-2016).
Starting a business and obtaining a construction permit is less time-consuming that the regional average (DB 2016).
Property rights are protected in Taiwan, and the judiciary enforces contracts effectively (BTI 2016). In the same vein, business executives perceive the protection of property rights in Taiwan as being strong (GCR 2015-2016).
In one corruption case, in late 2015, the former Deputy Mayor of New Taipei City, Hsu Chih-chieh, was indicted on charges of corruption. Hsu had accepted bribes, gold bars and luxury watches from two real estate developers in return for expediting the approval and review process of several urban development projects (HRR 2015).
Corruption in the tax administration does not appear to be a major problem in Taiwan. Bribery and irregular payments are rarely exchanged when meeting with tax officials (GCR 2015-2016). Paying taxes in Taiwan is more time-consuming compared to regional averages totaling 221 hours per year, yet the number of payments is less than half that of neighboring countries (DB 2016).
With the leak of the Panama Papers in 2016, it was revealed that Taiwan topped the list of countries acting as safe tax havens with 19,600 people and companies hiding money in the country (South China Morning Post, May 2016).
Trading across borders in Taiwan carries a low corruption risk for companies. Transparency is ranked as rather high and bribes and irregular payments are rarely exchanged in meetings with tax officials (GETR 2014, GCR 2015-2016). Furthermore, business executives perceive the efficiency of customs procedures (formalities regulating the entry and exit of merchandise) as being efficient (GCR 2015-2016).
The public procurement sector in Taiwan presents business with high corruption risks. Surveyed companies state both that public funds are sometimes diverted to companies, individuals or groups due to corruption and that government officials sometimes show favoritism when deciding upon policies and contracts (GCR 2015-2016). Furthermore, business and politics are closely linked raising the risks of corruption in the sector (FitW 2015). Public procurement and tenders are governed by the Government Procurement Act (GPA). Under the Act, a procurement project with a value of over TWD 1 million is required to be published on the Public Construction Commission‘s (PCC) website. The PCC publishes all major projects that require open bidding, in accordance with the requirements set by the GPA. Taiwan acceded to the World Trade Organization’s Agreement on Government Procurement, which embodies the principles of transparency and fair and effective competition.
In one corruption case involving the state rail sector it was found that railway officials accepted bribes and sex services in exchange for helping businesses secure contracts for eight rail projects worth over TWD 1.1 billion over the last six years. The court sentenced 14 people, seven of which were officials from the Taiwan Railway Administration (TRA) including a former deputy head of the TRA, in the case to 17 years’ imprisonment. A construction agent and six businessmen were also sentenced to five years in prison for bribing officials (The Standard, Sep. 2016). Lai Su-Ju, a Taipei city council member holding a high position within the ruling nationalist Kuomintang (KMT) party, and with close ties to the president of Taiwan, also received a ten years’ imprisonment sentence for demanding a bribe from a company seeking a construction contract (FitW 2015). Companies are, thus, recommended to use a specialised public procurement due diligence tool to mitigate the corruption risks associated with public procurement.
The government of Taiwan has a comprehensive legal anti-corruption framework in place and implementation is regarded as effective (HRR 2015). The Taiwanese Anti-Corruption Act, Criminal Code and Organic Statue for Anti-Corruption Administration criminalize corruption in the form of active bribery, passive bribery, bribery of foreign officials and attempted bribery, while money laundering is criminalized under the Money Laundering Control Act. Both the Anti-Corruption Act and the Criminal Code provide for extraterritorial jurisdiction, thus Taiwanese companies can be prosecuted for corruption committed outside Taiwan (NRF 2014). The Corruption Punishment Statute /Anti-Corruption Act and the Criminal Code stipulate the penalties for corrupt activities, punishable by a maximum sentence of life imprisonment and a fine of up to USD 3.3 million. The Agency Against Corruption ethics guidelines outline acceptable low-level gratuities and gifts; they are not explicitly called facilitation payments. Yet, any facilitation payment could be viewed as a bribe by the courts (NRF 2014). Taiwan also has a set of comprehensive laws and regulations designed to target corruption and to build clean and transparent governance, such as the Political Donations Act, the Lobbying Act, the Act on Property-Declaration by Public Servants and the Act on Recusal of Public Servants due to Conflicts of Interest. The Witness Protection Law offers protection for witnesses who testify in criminal cases concerning areas such as money laundering, election fraud or bribery by public officials. The Law also requires the identity of the witness to be kept anonymous. The Anti-Corruption Informant Rewards and Protection Regulation provides protection for whistleblowers; the name, gender, date of birth, identification numbers and address of a whistleblower must be kept confidential. Elected officials and specified appointed public officials are subject to financial disclosure laws and can be sentenced to imprisonment for repeatedly failing to comply (HRR 2015).
The Ministry of Justice, responsible for fighting corruption, is perceived insufficiently independent to crack down of violations and had initiated politically motivated investigations against politicians (HRR 2015). Taiwan is neither party to the UN Convention Against Corruption not the OECD Convention on Combatting Bribery.
The Constitution guarantees freedoms of speech and of the press, and these rights are respected by the government (HRR 2015). Taiwan’s media environment is considered to be among the freest in Asia and has a vigorous and diverse press that reports aggressively on government policies and corruption allegations (FotP 2015). Media outlets are privately owned in Taiwan and Taiwanese law prohibits government and political parties from owning or running broadcast media companies, and government entities and political parties are also required to divest themselves of stakes in all broadcast companies (FotP 2015). Nonetheless, the concentration of media ownership has raised concerns about its impact on press freedom (HRR 2015). One of the effects is felt in journalistic reports in favor of the Republic of China, which can be traced back to political considerations and the influence of Taiwanese business with close ties to China (HRR 2015). The government does not censor, restrict or monitor internet content (HRR 2015). The media environment is considered ‘free’ (FotP 2015).
Taiwan has one of the most vibrant civil societies in Asia, with numerous NGOs engaging in different public activities and featuring high-degrees of social and institutional trust (BTI 2016). All NGOs must register with the government, and those working with human rights, social welfare and environmental issues are active and can operate without harassment (BTI 2012). The Ministry of Justice, also responsible for combatting corruption, cooperated with civil society organizations and Taiwanese authorities have generally been cooperative and responsive to the views of NGOs (HRR 2015).
- World Economic Forum: Global Competitiveness Report 2015-2016.
- World Bank & IFC: Doing Business 2016.
- The Standard: ‘Railmen jailed over sex bribes’, 1 September 2016.
- South China Morning Post: ‘Chinese dominate list of people and firms hiding money in tax havens, Panama Papers reveal’, 10 May 2016.
- Freedom House: Freedom in the World – Taiwan 2015.
- US Department of State: Human Rights Practices Report – Taiwan 2015.
- Freedom House: Freedom of the Press – Taiwan 2015.
- Norton Rose Fulbright: Taiwan 2014.
- World Economic Forum: Global Enabling Trade Report 2014
- US Department of State: Investment Climate Statement – Taiwan 2013.
- Transparency International: Global Corruption Barometer 2013.
- Freedom House: Freedom in the World – Taiwan 2013.
- Bertelsmann Foundation: Transformation Index – Taiwan 2012.
- The Control Yuan of the Republic of China: Sunshine Acts – Laws and Regulations.