Portugal

Portugal Corruption Report

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Snapshot

Portugal_250x165.jpgForeign companies operating in Portugal may encounter some instances of corruption, but they do not identify corruption as a problem for thier operations. Corruption and abuse of power are most prevalent at the municipal level, particularly in the areas of urban planning and public procurement. The Portuguese Criminal Code makes it illegal to give or accept a bribe, and there is a law (in Portuguese) that establishes the terms of liability for corruption offences in international trade and private activities. Amendments (in Portuguese) to the Criminal Code comply with GRECO, UN and OECD's recommendations on fighting corruption. Individuals and companies are criminally liable for corruption offences, including bribery of foreign public officials in international commerce. Facilitation payments are prohibited, and gifts and hospitality may be considered illegal depending on their intent. Recurring corruption scandals involving high-level politicians, local administrators and businesses abusing public funds have revealed that safeguards to counter corruption, and abuses of power have been somewhat inefficient in Portugal.

November 2015
GAN Integrity

Judicial System

European_Commission.svg.pngThere are no reports of corruption in the Portuguese judicial system, which is relatively independent but inefficient and slow (FitW 2015). Businesses consider the efficiency of the judiciary in settling disputes and challenging government regulations as low (GCR 2014-2015). The complexity of the judicial system and delays in case handling are among the most significant obstacles for effective prosecution of corruption. Criminal proceedings are often delayed due to inadequate judicial organisations, a lack of judges trained in economic and financial crimes, and a shortage of specialised courts for crimes concerning corruption (NISA 2012). Most citizens consider the Portuguese judiciary to be corrupt (GCB 2013), and almost half believe that bribery and abuse of power to be widespread within the courts (European Commission, Feb. 2014). The government encourages non-judicial dispute resolution through the Ministry of Justice's Office for Alternative Dispute Resolution (ICS 2015).

Portugal 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.

Police

Portuguese police services reliably protect companies from crime (GCR 2014-2015), and the government has effective mechanisms to investigate and punish police abuse and corruption (HRR 2014). Many citizens have very low confidence in police integrity (GCB 2013) and almost half of surveyed citizens believe abuse of power and bribery to be widespread among police officers (European Commission, Feb. 2014).

Public Services

Over one-third of surveyed citizens believe that bribery and abuse of power to be common among public officials who issue business and building permits, and officials who conduct business inspections (EB 2014). Companies rate inefficient government bureaucracy as the main constraint to doing business in Portugal (GCR 2014-2015). Starting a business is considerably less costly and less time-consuming than the average found in OECD countries (DB 2015). Almost half of households in Portugal perceive civil servants and public officials to be corrupt (GCB 2013).

Land Administration

The Portuguese land administration is not free from corruption. In fact, authorities have evaluated urban planning to be among the areas most vulnerable to corruption (EUACR 2014). Corruption risks are highest at the municipal level, where several cases have been investigated in relation to abuse of power in urban planning and the award of construction licences. Factors contributing to increased risk of corruption in this area include complex regulatory frameworks related to urban municipal plans, broad discretionary powers of local authorities in re-zoning decisions, and opaque project approvals and licensing procedures (EUACR 2014). Almost half of citizens believe bribery and abuse of power to be widespread among public officials who issue building permits (EB 2014). Registering property is considerably less time-consuming than the average of other OECD countries, but more costly (DB 2015).

Tax Administration

Despite some isolated cases, no evidence suggests that the Portugese tax administration is corrupt. The country reduced the corporate income tax rate (DB 2015), and an increase in the use of electronic filing has improved interaction between taxpayers and tax officials (ASP 2014). Tax rates are still ranked among the most problematic factors to doing business (GCR 2014-2015). Portugal's tax legislation prohibits the deduction of bribery and facilitation payments, and tax authorities may examine tax returns up to four years after they have been filed to verify whether bribes have been deducted (OECD 2013). More than a third of surveyed citizens believe bribery and the abuse of power to be common in the country's tax administration (EB 2014). 

Former Prime Minister José Sócrates was arrested for alleged tax fraud and money laundering (FitW 2015). In connection with the same case, Armando Vara, a deputy minister for two governments between 1995-2000, was recently also arrested on suspicion of corruption, tax fraud and money laundering. Their case is still pending (The Big Story, July 2015). 

Customs Administration

Corruption at Portugal's borders is not considered a problem, and the efficiency and transparency of border administration is very high (GETR 2014). Businesses rarely encounter demands for irregular payments when dealing with exports and imports (GETR 2014). Over one-third of surveyed citizens believe bribery and the abuse of power are widespread in the customs administration (EB 2014). Trading across the boarders of Portugal is less costly than in the rest of the OCED countries, yet on average more time consuming (DB 2015). 

Late last year, the head of Portugal's boarder agency and boarder control officials were arrested in connection with a corruption scandal involving the distribution of visas to non-European residents. Non-Europeans, mainly Chinese, profited from claiming a five-year residency permit which Portugal offered on the premise of purchasing a property for at least USD 550,000. Allegedly, corrupt officials inflated the prices of the properties and used the difference for illegal payoffs (The Economist, Nov. 2014). Former Interior Minister Miguel Macedo is also to be charged for his role in the 'golden visa' scandal  (First Post, July 2015). The minister denies any responsibility in the affair.

Public Procurement

Corruption is reportedly widespread in Portugal's public procurement sector. A significant majority of companies believe that corruption is common among both national and regional authorities (European Commission, Feb. 2014). Procedural irregularities that lead to abuses in the awarding of public tenders are a recurring problem for the municipalities, and represent a potential risk to private companies. Some municipalities suffer from weak monitoring systems, preventing them from identifying conflicts of interest and favouritism in tender decisions. Many civil servants have insufficient knowledge of corruption-related risks. For instance, more than one-third of Portuguese companies refrained from taking part in tenders due to the perceived tailor-made criteria, while almost half report that corruption prevented them from winning a tender or contract (European Commission, Feb. 2014). Around one-third complain of impossible deadlines, collusive biding and of deals being agreed upon beforehand (European Commission, Feb. 2014), while more than two-thirds report conflicts of interest in the evaluation of bids, and abuse of emergency grounds to get around competitive procedures (EUACR 2014). One out of four companies report it being common practice to use bribery in their sector to win contracts (NTCBR 2013), and businesses account that favouritism taints the decisions of procurement officials when awarding public contracts (GCR 2014-2015).

Public-private partnerships (PPPs) are widely used by the government to launch public works related to hospitals, water systems and road construction. Weaknesses related to some PPPs at the local level point to insufficient transparency in tender procedures, shortcomings in project evaluations, and unclear reasoning of award decisions. To mitigate this problem, the government has strengthened the Court of Auditors' auditing powers and capacity to perform ex-ante and ex-post control of public contracts (EUACR 2014). Companies are recommended to implement special due diligence procedures to counter the likelihood of encountering corruption in Portugal's procurement process.

Legislation

Portugal's Criminal Code makes it illegal to give and accept bribes or other undue advantages, and there is a law (available here) that establishes the terms of liability for corruption offences in international trade and private activities. Anti-corruption provisions apply to all individuals and forbid bribery (both directly and through a third party) in public and private sectors, and bribery of foreign public officials in international commerce. Complying with the GRECO, OECD and the UN conventions and recommendations is the law on crimes of responsibility of political offices and high public officials, the law on corruption in international trade and the private sector, the law on corruption in the sports activity, and the law on ensuring whistleblowers in corruption related matters (Global Compliance News, June 2015). Facilitation payments are prohibited, and gifts and hospitality which represent any form of pressure or influence are also considered bribes. Companies are held criminally liable for corruption offences committed by their an employee, a subsidiary or a temporarily contracted staff. The Criminal Code provides an exemption for companies from liability when an agent has acted against express orders or instructions, thereby leaving it up to management to establish prevention mechanisms (ACBPM 2011). Penalties for bribery offences committed by individuals range from fines and up to eight years imprisonment, and corporate entities may be ordered to pay a fine of up to 600 days (where each day corresponds to a value ranging from EUR 100 to EUR 10,000) (ACR 2014). The government has generally implemented anti-corruption laws effectively (HRR 2014). Portugal has ratified the OECD Anti-Bribery Convention, the United Nations Convention Against Corruption (UNCAC) and the Council of Europe’s Criminal Law Convention against Corruption.

Civil Society

Freedom of speech and of the press are constitutionally guaranteed and respected in practice (HRR 2014). Despite some isolated cases of alleged political interference in media affairs, the independence of the media is not threatened. Portugal's media is active in its coverage of corruption cases and in shaping public perceptions about the authorities’ efforts in fighting it. Intimidation or physical harassment of journalists is rare (FotP 2014). Access to the Internet is not restricted, and the country's media environment is considered 'free' (FotP 2014).

Freedom of assembly is also respected in Portugal (HRR 2014). Civil society organisations (CSOs) are not particularly active or vocal in public debates, with their role as watchdogs being limited, especially when concerning organisations working with advocacy and social causes, partly due to inactivity and partly due to dependence on political funding. Despite this, political interference in CSO affairs is reportedly not a problem. Very few CSOs are active in the fight against corruption in Portugal (NISA 2012). 

Sources

Topics: Europe & Central Asia