Why Elections Prompt More Corruption, Clientelism, and Forbearance? A Study of Attitudes in Albania, Kosovo, and North Macedonia

Theoretical Framework

Corruption is often regarded as a defining characteristic of transition economies (Treisman 2003). Indeed, scholars have linked corruption to the legacy of state socialism, tracing postsocialist graft to elite (i.e. nomenklatura) and non-elite (i.e. blat) networks of favours, or economies of favours, that proliferated under communism in response to shortages and restrictions (Ledeneva 1998; Miller et al. 2000; Uberti 2018; Amini, Douarin, and Hinks 2022). Corruption is generally also considered to be linked to informality and clientelism (Efendic and Ledeneva 2020). Other studies highlight the relationship between corruption and various institutional factors, such as democracy and economic freedom, as well as cultural factors, such as religious tradition (Treisman 2000). Often treated as a static variable, there is little evidence that corrupt or “flexible” behaviour may be related to a particular time or event, especially a recurrent one.

The literature also shows that corruption may be associated with the types of social and political organisation typical of low- to middle-income societies, rather than specific cultural traits or institutional characteristics (Khan 2011; Uberti 2016). In this context, corruption may be linked to electoral competition and may fluctuate around elections. As highlighted in the introduction, evidence from younger democracies, including Western Balkans countries, points at the incumbent’s (mis)use of various instruments to influence elections, including state-created rights or permits, and higher tolerance for, or enabling of, increased fiscal evasion and informal construction prior to elections. However, there is limited understanding of the underlying rationale and mechanisms at play which may vary across regions, countries, or even population strata (Polese et al. 2017).

While these tendencies can be used to explain, in general terms, what is happening, they provide limited insight into how or why it is happening, which is fundamental in addressing an issue, understanding its dynamics, and ultimately helping decision-makers to design the appropriate interventions. The same issue arises in quantitative investigations into the possibility that a politicised public administration may deliberately reduce tax collection efforts before elections to boost the economy as a whole and/or favour specific groups or firms connected to the ruling coalition. This phenomenon occurs in advanced industrialised economies as well. Lami and Imami (2019) found a decrease in tax collection during elections in OECD countries, while Young, Reksulak, and Shughart (2001) found that, in the US, changes to Internal Revenue Service (IRS) audits coincide with elections, becoming less intense in electorally sensitive districts. The electoral effect is found to be more pronounced in younger democracies or transition economies with weak checks on the behaviour of the executive and more limited administrative capacity to monitor and discipline the tax administration. Accordingly, Lami and Imami (2019) find more pronounced cyclical effects in new democracies than in the more established OECD countries. Furthermore, incumbents in emerging economies and new democracies are under pressure to deliver tangible results – preferably reflected in personal gains – before elections, as voters in these regions often distrust politicians and their promises (Lami and Imami 2019).

These phenomena can be analysed from two different (but complementary) perspectives, namely neo-patrimonialism and forbearance. Neo-patrimonialism and clientelism (Weber 1947/1921) have been recognised as key principles of social organisation in developing and transition economies (North et al. 2013) – this applies to many economies in the Global South and the Western Balkan region, too. In younger democracies, the formal institutions of electoral contestation and participation may coexist with clientelist forms of political and economic organisation. These regimes can be considered “neo-patrimonial democracies”, characterised by patron-client networks, that is relationships between patrons (often politicians or ruling elites) and clients (individuals or groups seeking favours) that involve exchanges of financial resources for various benefits. The incumbent’s strategy to gain and maintain political power is primarily driven by the ability to create material benefits, which are then distributed to clients (Kelsall 2011). As a result, the ability to deliver on policy programs is often less relevant.

In this context, economic actors, such as firms, may engage in rent-seeking activities (e.g. bribes, political contributions) to secure favourable treatment and economic privileges, while patrons use the distribution of rents and property rights to obtain political support, consolidate power, and maintain control over the political landscape. In the context of elections, patron-client networks serve as a bridge between voters, politically connected firms, and political organisers – voters may receive benefits from these networks, and politically connected firms use them to advance their interests (Khan and Jomo 2000). Elections can reveal the relative organisational strength of competing patron-client factions. Due to the heightened need to mobilise support and re-establish political equilibrium, corruption and vote-buying may be particularly pronounced prior to elections, especially in countries with weak checks on the behaviour of the executive and weakly institutionalised political parties with poorly developed policy platforms. In this context, the incumbent may increase the (corrupt) flow of rights and rents to their clientele before elections to hedge against the risk of electoral defeat (Tornell and Lane 1999) and to mobilise votes and support, thereby increasing the likelihood of electoral success (Collier and Hoeffler 2009). Consequently, in such cases, the incumbent is likely to engage in pre-election corruption, based on the clientelistic nature of political competition. That would imply that (the lack of) fiscal enforcement can, to a certain extent, be driven by clientelist motives, favouring the “client”.

While clientelism is a plausible explanation for the electoral patterns described above, motives and mechanisms can go well beyond this phenomenon and include forbearance, which is defined as a way of refraining from enforcing a law or right. However, when this occurs around elections, it may refer to the limited application of a law or a rule by political actors. For instance, Holland (2017) examines the way that some governments, or factions, in Latin American countries may arbitrarily decide to play lose or fail to enforce rules or laws as a form of informal welfare or social policy. Indeed, as pointed out in other studies, forbearance and other mechanisms of informal welfare can serve as a form of redistribution by allowing specific (e.g. disadvantaged) groups to access resources or opportunities they would otherwise be denied (Gupta 1995).

As in previous works, the struggle between a government and government officers who are expected to enforce rules, but are also embedded in a society and feel solidarity with their compatriots (Polese and Rekhikhashvili 2017), can lead to the flexible application of rules as a social welfare mechanism. This tolerance can even go as far as to allow self-organisation of some areas of a state (Haid 2017; Haid and Hilbrandt 2019). While some decisions are dictated by reasons of pragmatism or solidarity, in other cases forbearance may be based on more cynical approaches. For instance, politicians may tolerate certain practices by a group whose votes they wish to attract, and governments may use the loose application of laws to support certain strata of a society without having to pay for it (Davies and Polese 2015).

Forbearance allows more flexible rules and indirect interventions. What is important for this article is the idea that forbearance could be regarded as comprising informal redistribution and support mechanisms, aimed at appealing to voters. In the light of fiscal enforcement, deliberate tolerance of greater economic informality (including higher fiscal evasion) may seek to accommodate the companies and households benefiting from it, similar to lowering tax rates (the latter should follow a chain of decision-making approvals and as such is more obvious or explicit than the tolerance of fiscal evasion, which is implicit). It is also important to note that the literature has paid a good deal of attention to Latin America, Asia, and Africa, but has often disregarded regions that might also fit this framework, including the Western Balkans.

Politicisation of Tax Administration as a Prerequisite

The politicisation of public administration in the region in general, and of tax administration in particular, has already been well-documented. The tax authorities in Albania, for example, have traditionally been highly politicised, with tax inspectors selectively targeting taxpayers based on party affiliation and fines reportedly being used as a form of pressure (Lami et al. 2021; Imami, Pugh, and Lami 2024). The politicisation of public and administrative roles becomes apparent in various observations and experiences shared by interviewees across different sectors in the three countries. For instance, one Albanian food operator highlights that political ties are often manifested in tax inspectors and directors’ selections: “This can be noticed by the [tax] director. The directors are often selected based on their regional connections with the elected politicians” (AL, food).

Similarly, another respondent, representing a construction firm from Kosovo, observed that employment in the tax administration is largely influenced by political connections, stating, “I think that they [tax administration staff] are politicised because they are employed by politics” (XK, construction). This sentiment is echoed by another construction entrepreneur from Kosovo who noted: “Completely politicised, in most cases you can see how hiring is done” (XK, construction). Another respondent from the same sector and country estimated that “about 80 % of the administration is politicised” (XK, construction), reflecting a widespread perception that political ties are integral to public sector employment. Similarly, in North Macedonia, an interviewee emphasised the pervasive role of politics in all aspects of the Tax Directorate’s activities: “Everything in the DAP [Drejtoria e te Ardhurave Publike, Tax Directorate] is linked to politics. Employment, orders, selection of companies (for inspection), penalties” (NM, transport).

A respondent linked the participation of public administrative staff in political campaigns directly to politicisation, explaining: “As long as the public administrative staff are active in (political) campaigns, they are politicised, since the employment is done by politics” (XK, manufacturing). Another respondent noted: “Yes, some are politicised because they have family [members] within parties” (XK, food processing). Further emphasising the extent of political interference, another respondent (same country and sector) remarked: “They are very politicised because they carry out controls [inspection of companies] based on party affiliations” (NM, manufacturing).

Given this politicisation of staff, the aftermath of elections often brings a wave of personnel changes in public administration, especially when there is a change in government. One respondent from the mining sector in Albania pointed out: “About 50 % of the tax administration staff were changed after the last elections.” (AL, mining). The last parliamentary elections prior to this interview were in 2013 and resulted in a change in government from a Democratic Party-led to a Socialist Party-led coalition. In contrast to the many accounts of substantial politicisation in various sectors, there were a few entrepreneurs who suggested a more neutral environment, less influenced by politics. For instance, an operator in the food processing sector in Kosovo took the view that politics did not play a significant role, stating: “I don’t think that [tax administration] staff are politicised” (XK, food processing). Another interviewee from the same sector echoed this sentiment: “I would not say that they are politicised” (XK, food processing). A third respondent also expressed a more neutral stance, remarking: “Even if there is [politicisation of the tax administration], I don’t see that in my business” (NM, manufacturing).

Implications of Tax Administration Politicisation for Companies’ Performance and Survival

Highly politicised tax authorities provide opportunities for politicians to engage in bribery, to protect certain (connected) businesses that may be supportive of the incumbent party or be willing to offer bribes, or to penalise businesses that refrain from doing so or are close to the opposition. For example, a manufacturing entrepreneur in North Macedonia highlighted the close ties between politicians and businesses, stating: “A large share of businesses try to operate illegally or in collaboration with politicians. Therefore, through the DAP, politicians try to protect their businesses or eliminate competitors” (NM, manufacturing).

One company manager operating in the manufacturing sector in Kosovo asserted: “Yes, there are cases where companies have connections with and support from politics and benefit from favours” (XK, manufacturing). Another respondent from Kosovo highlighted: “Those who have connections with politics solve their problems quickly” (XK, food processing). A further respondent in the same sector noted: “Everything is politicised. Everything depends on whether you are close to the government, the opposition, or are neutral. Only businesses that are close to government are safe” (NM, construction).

The notion that political favouritism extends to regulatory leniency is reinforced by another comment from the construction sector: “Completely politicised. Firms with party connections are either informed in advance of inspections or are not inspected at all” (NM, construction). A similar view was expressed by a trade sector entrepreneur: “The political support helps (ensure) you do not get attacked by the tax administration. Without political support, you are more exposed” (AL, trade). While an entrepreneur from Kosovo told us: “There are companies that have support from the political entity, there are some that have never even had a single formal visit from inspectors” (XK, construction).

Indeed, some companies that need the tax administration to provide them with a service, most notably a tax rebate, have to rely on political connections. Our semi-structured survey provided greater insight on this issue. Companies operating in different sectors in Kosovo and North Macedonia emphasised the importance of links or ties to politics (or politicians), with comments such as: “There have been cases of reimbursement procedures going much faster for companies linked to politics, sometimes within a month, while I had to wait two years” (XK, construction) or: “Everything depends on the connections that the enterprises have with politics” (NM, transport).

Some respondents emphasised the importance of connections more generally, without explicitly linking them to politics. “In general, companies with secondary ties are favoured” (XK, food processing), or: “I don’t know about others, but I receive warnings from people that I know in the inspections sector” (NM, mining), reflecting the crucial role played by informal networks. Another respondent emphasised that companies rely on personal networks to secure VAT reimbursements: “To get VAT reimbursements you certainly need connections” (NM, mining), further underlining the dependence on personal networks.

In addition to personal and/or political connections (both of which are needed to enjoy protection from inspections or quicker VAT reimbursements, as highlighted above), bribes also appear to be crucial for some interviewees. One respondent reported that “unnecessary delays are irritating; to speed up the procedure you are forced to provide favours” (XK, construction). Another interviewee provided the following response: “There are many delays when you apply for a VAT reimbursement. Problems are solved only when a percentage is paid […]. Otherwise, it’s impossible. You apply for VAT reimbursement and end up facing penalties higher than the reimbursement you applied for” (NM, construction). Bribery seems to be the main survival strategy employed by entrepreneurs who are not close to the incumbent party. An entrepreneur from the construction industry (which tends to be highly dependent on politics, also for construction permits), noted: “Very politicised, either you have to be close to the government, or pay a bribe, or disappear as a business” (NM, construction).

However, other interviewees stated that they had not observed such behaviour or that bribes are only necessary if companies engage in tax evasion. For instance: “We pay our taxes regularly, and I don’t think this behaviour exists” (XK, food). “Usually companies pursuing illegal VAT reimbursement need political connections and to engage in bribes. Companies that operate properly [in compliance] don’t need that.” (NM, construction).

The Relationship between Tax Administration Behaviour and Elections

As shown in Table 3, no more than 10 % of respondents believe it is more likely that they will incur a fine or be forced to pay outstanding taxes by the tax administration prior to elections. In contrast, more than 20 % of respondents in all three countries believe this is more likely to occur after a new government is formed. Overall, fewer than half of all respondents see no connection between tax inspections and elections.

For many companies, tax behaviour is strongly related to elections. This is also clear from comments made during our semi-structured interviews. Two entrepreneurs operating in the different sectors in North Macedonia highlighted that inspections and controls follow a regular pattern, with “no inspections before the elections” (NM, textile) and “frequent controls [inspections] afterwards” (NM, construction). A similar pattern can be found in Albania, where one respondent stated: “Inspections before the elections are rare, but immediately increase after the elections” (AL, processing).

One reason why tax inspections decrease before elections is that political parties are seeking to be more attractive to voters, as confirmed by one construction entrepreneur from North Macedonia: “To make itself more attractive during elections, the party reduces inspections before elections” (NM, construction). The aim may be to gain favour with companies, thereby appealing to potential voters in two ways: on the one hand, by not inconveniencing them with inspections, while on the other, (indirectly) allowing them to benefit from reduced monitoring and enforcement, facilitating tax evasion (given the high diffusion of fiscal evasion in the region), and thereby increasing their real profits.

It appears that fewer tax authority controls before elections are also linked to pressure for votes as well as to bribes, as illustrated by one respondent: “Before the elections, there are pressures for votes and cash” (AL, trade). Some respondents confirmed that certain larger companies, with large numbers of employees, are persuaded or pressured to influence their employees to vote for the incumbent party. Fearing that fines could influence election outcomes, the “Pro-Export Albania” association even requested that the Central Election Commission suspend business inspections for four months before the 2021 parliamentary elections (Imami, Pugh, and Lami 2024).

Interestingly, one interviewee from North Macedonia highlighted that “businesses which are close to the government usually engage in lobbying activities and pressure (their employees) so that the same party stays in power” (NM, trade), while another interviewee from the same sector and country expressed a similar view: “[…] large companies are generally close to the government and they know that if the government goes, they lose business” (NM, construction). Indeed, in some sectors, most notably mining and construction, business success depends on access to permits/licenses, for which a good relationship with the incumbent is crucial. Without such connections, businesses risk being pushed out of the market.

One of main reasons why tax inspections decline before elections might be that tax inspection staff who are politically affiliated are busy with election campaigns, as illustrated by the entrepreneurs we interviewed. One entrepreneur from the construction sector in Kosovo highlighted that “[d]uring elections [inspections] are reduced because they [inspectors] are busy with the elections and not with their assigned duties” (XK, construction). A similar view was expressed by another entrepreneur operating in the same sector and country: “During the elections they are reduced because there are officials that go out (to participate) in campaigns” (XK, construction). Indeed, only a few entrepreneurs state that they do not see any difference in tax authorities’ behaviour related to elections, as illustrated by comments by two entrepreneurs from North Macedonia and Kosovo: “Tax inspections are not related to elections” (NM, textile); “I don’t think that inspectors’ visits are connected to elections, there are no differences” (XK, construction).