What is Bribe

A bribe is an illegal act involving the exchange of consideration, such as money, with the purpose of influencing behavior. Bribes are often made to public officials or heads of other regulatory agencies to escape legal convictions or unfavorable rulings or as an incentive for the payee to alter or overlook pertinent regulations that would otherwise restrict the payer.

BREAKING DOWN Bribe

Bribes and kickbacks (a form of bribery) are illegal and, in the United States, not tax deductible. Bribes that take the form of kickbacks to insurance or securities customers are known as rebating and can result in disciplinary actions by regulatory authorities.

Types and Scales of Bribes

Bribes occur in many forms, ranging from minor transactions between individuals to major deals between corporations and/or governments. Bribes can also be masked as tips, gifts, favors, donations, et al.  There is no universal definition or classification system for bribery as some nations approve of and legalize certain transactions that are illegal elsewhere.  For example, in the United States, it is illegal to offer payment to a police officer to avoid a penalty for a violation.  However, in some countries, it is the norm or expected behavior.  Contrastingly, it is considered bribery in some nations for political campaigns to receive cash donations.  In the United States, it is not illegal provided the donation is made within specific limits and according to certain guidelines.  Bribery can occur between individuals, firms, industries, and nations.  Although bribes are most commonly associated with professional sports and politics, it is also a growing problem for other sectors, such as medicine/pharmaceuticals.  In the medical and pharmaceutical industries, some pharmaceutical corporations offer bribes to practitioners to choose their drugs over others.  Despite the differences in definitions and classifications, the concept of bribery is widely considered a growing global problem.  According to the World Bank, approximately $1 trillion is paid annually in bribes.  

Tax Treatment of Bribes

The United States prohibits bribes as being recorded for tax purposes because they stifle the democratic process, encourage unethical behavior, and conflict with the principles of freedom and equality.  Although most developed nations have practices similar to the United States, some developing and a few developed nations allow bribes to be deducted from taxes.  To prevent bribery, the OECD Council established the Anti-Bribery Convention, which sought to eliminate corruption in developing nations by introducing sanctions against bribery in certain international business transactions of companies based in member countries.