Europe & Central Asia
Portugal risk report
Companies face an overall moderate risk of corruption when doing business in Portugal. Corruption and abuse of power are most prevalent, in the areas of urban planning and public procurement. The Portuguese Criminal Code makes it illegal to give or accept a bribe, and the Law on Corruption in International Commerce and the Private Sector (in Portuguese) establishes the terms of liability for corruption offenses in international trade and private activities. Individuals and companies are criminally liable for corruption offenses, 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. While the country has made significant progress in the past decade, 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.
Judicial system Moderate risk
There is a moderate risk of corruption in Portugal's judiciary. The judiciary in Portugal is independent and actively ensures that the government conforms to the law (ICS 2017; SGI 2016). Companies perceive bribes and irregular payments in return for favorable judicial decisions to be rare (GCR 2015-2016). Almost half of surveyed citizens believe that bribery and abuse of power are widespread within the courts (European Commission, Feb. 2014). On the other hand, less than two in every ten households perceive judges and magistrates to be corrupt and nearly none of the respondents indicated having actually paid a bribe to the judiciary (GCB 2016). About two out of five companies perceive the independence of courts and judges in Portugal as limited (JS 2017). Companies express insufficient confidence in the efficiency of the legal framework pertaining to settling disputes and challenging regulations (GCR 2017-2018). Nearly half of judges in Portugal find that promotions are sometimes based on other than their skill and experience (ENCJ 2017). Only very few judges indicate they have faced inappropriate pressure to take a decision in a case in the past two years (ENCJ 2017). Staff shortages and inefficiency have led to the buildup of a considerable backlog of cases in the judiciary (FitW 2016). The government encourages non-judicial dispute resolution through the Ministry of Justice's Office for Alternative Dispute Resolution (ICS 2017).
The time required to enforce a contract is a little lower than in other OECD high-income average (DB 2018). 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.
Prosecutors have charged the Vice-President of Angola, Manuel Vicente, for paying a EUR 760,000 bribe to a Portuguese prosecutor investigating corruption allegations against Vicente (Reuters, Jun. 2017). The prosecutor who accepted the bribe was arrested in early 2016 and is due to stand trial (Reuters, Jun. 2017).
Police Low risk
There is a moderate to low risk of corruption when dealing with Portuguese police. Portuguese police services reliably protect companies from crime (GCR 2017-2018), and the government has effective mechanisms to investigate and punish police abuse and corruption (HRR 2016). Almost half of surveyed citizens believe abuse of power and bribery to be widespread among police officers (European Commission, Feb. 2014).
Public services Low risk
There is a moderate to low risk of corruption in Portugal's public administration. Bribes and irregular payments when dealing with public services are rare (GCR 2015-2016). 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 2017-2018). Portugal's regulations are often very complex and densely written, which has led to some uncertainty about the applicability of some legislation (SGI 2016). The legal, regulatory, and accounting systems in Portugal are generally transparent and in line with international norms (ICS 2017).
Starting a business is considerably less costly and less time-consuming than the average in OECD countries (DB 2018). Obtaining a construction permit takes a few more steps than the OECD average, but is significantly less time-consuming (DB 2018).
Land administration High risk
Companies operating in the land administration contend with moderate to high risks of corruption. Companies generally express confidence in the government's ability to protect property rights (GCR 2017-2018). Almost half of citizens believe bribery and abuse of power to be widespread among public officials who issue building permits (EB 2014). 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 licenses (EUACR 2014). 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). As of 2013, between ten and twenty percent of land in Portugal lacks a clear title (ICS 2017). A 2016 measure holds that all land that remains unregistered in the next two years will be transferred to a state-managed "Land Bank" which will hold the land for a period of fifteen years (ICS 2017). If the land still remains unclaimed after his period, the land will revert to the state (ICS 2017). Property in Portugal may be expropriated in the public interest with prompt, adequate, and effective compensation (ICS 2017).
Registering property is considerably less time-consuming than the average of other OECD countries, but more costly (DB 2018).
Tax administration Low risk
There is a moderate to low risk of corruption in Portugal's tax administration. An increase in the use of electronic filing has made filing taxes easier and reduced the required time and effort (EYAS 2017). Tax rates are still ranked among the most problematic factors to doing business (GCR 2017-2018). 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). Tax evasion remains a problem in Portugal (SGI 2016). 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 2015). The European Commission estimates that around ten percent of VAT is evaded and not collected (ECVG 2017). While there are slightly fewer tax payments for companies each year, the total time required to file taxes is significantly longer than in other OECD high-income countries (DB 2018).
Former Prime Minister José Sócrates was arrested for alleged tax fraud and money laundering (Reuters, Nov. 2014). 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 (Reuters, Nov. 2014). Sócrates has sued the state for greatly exceeding the maximum permissible time-frame of 18 months for the investigation to conclude (Algarve Daily News, Feb. 2017). Sócrates was finally indicted in October 2017 on graft and money laundering charges after a four-year inquiry (Reuters, Oct. 2017).
Customs administration Low risk
Corruption at Portugal's borders is a moderate to low risk for businesses. Bribes and irregular payments in customs procedures are rare (GETR 2016). Yet, over one-third of surveyed citizens believe bribery and the abuse of power are widespread in the customs administration (EB 2014). Companies are generally satisfied with the time-predictability and efficiency of the clearance process (GETR 2016). Companies do complain about burdensome import procedures and high tariffs (GETR 2016). Trading across the borders of Portugal is significantly less costly and time-consuming than in the rest of the OCED countries (DB 2018).
In late 2016, the head of Portugal's border agency and border 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 was also charged for his role in the 'golden visa' scandal (Portugal Resident, Feb. 2017). The minister denies any responsibility in the affair. A total of seventeen suspects are standing trial in the case as of 2017 (Portugal Resident, Feb. 2017).
Public procurement Very high risk
Corruption is reportedly widespread in Portugal's public procurement sector. Companies perceive favoritism in decisions of government officials and diversion of public funds to be common (GCR 2017-2018). 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 (EUACR 2014). 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 bidding and of deals being agreed upon beforehand, while more than two-thirds report conflicts of interest in the evaluation of bids, and abuse of emergency grounds to get around competitive procedures (European Commission, Feb. 2014, EUACR 2014). Weak monitoring systems prevent officials from identifying conflicts of interest and favoritism in tender decisions (EUACR 2014). Public-private partnerships (PPPs) are widely used by the government to launch public works related to hospitals, water systems and road construction (EUACR 2014). 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 (EUACR 2014). 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).
The defense sector is highly vulnerable to procurement fraud (GDACI 2015). An investigation into fraud in the provision of food to Air Force mess halls is underway (HRR 2016). The case, dubbed as "Operation Zeus" is said to have cost the state as much as EUR 10 million over inflated food prices (Portugal Resident, Jul. 2017). Sixteen people were arrested in the case, including a high ranking Air Force officers and a major general (Portugal Resident, Jul. 2017). Companies are recommended to implement special due diligence procedures to counter the likelihood of encountering corruption in Portugal's procurement process.
Portugal's Criminal Code criminalizes active and passive bribery, embezzlement, trading in influence, and money laundering. Penalties vary but may include imprisonment of up to eight years for passive corruption and up to five years for active corruption (CMS 2016). Bribery of foreign officials is criminalized separately in Law No. 20/2008 and may be penalized by a maximum of eight years imprisonment, while companies are liable for a fine of up to EUR 9,6 million (CMS 2016, The Law Reviews 2017). More information about the various penalties may be found here. Law No. 20/2008 also criminalizes private sector corruption. Facilitation payments are prohibited, and gifts and hospitality which represent any form of pressure or influence are also considered bribes (CMS 2016). Gifts which are "socially adequate conduct in conformity with traditions and customs" are exempt from prosecution (CMS 2016). Companies are held criminally liable for corruption offenses committed by an employee, a subsidiary or a temporarily contracted staff (The Law Reviews 2017). 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 (The Law Reviews 2017). While the law does not require companies to have a compliance program, having one in place may help to reduce the company's criminal liability (The Law Reviews 2017). The Law on Corruption in International Commerce and the Private Sector contains a number of protections for whistleblowers, including the right to remain anonymous until a suspect is formally charged (GLI 2017). GRECO (Group of States Against Corruption) has criticized the lack of strong and coherent asset declarations and conflict of interest legislation for parliamentarians, judges, and prosecutors (GRECO 2016). Portugal generally implements its anti-corruption framework effectively (HRR 2016). 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.
Freedom of speech and of the press are constitutionally guaranteed and respected in practice (HRR 2016). Portugal has an independent press and a functioning democratic system which enable freedom of speech (HRR 2016). The European Court of Human Rights (ECHR) has criticized Portugal for limiting freedom of expression through defamation convictions (FitW 2016). There is a freedom of information law and the government generally implements it effectively (HRR 2016). Access to the Internet is not restricted, and the country's media environment is considered 'free' (FotP 2017).
Civil society organizations (CSOs) are not particularly active or vocal in public debates, with their role as watchdogs being limited, especially when concerning organizations working with advocacy and social causes, partly due to inactivity and partly due to dependence on political funding (NISA 2012). Civil society is generally weak and unable to educate citizens on policy issues (SGI 2016). Civil society has almost wholly been shut out of policy-making processes in Portugal (SGI 2016).
- World Bank: Doing Business 2018.
- World Economic Forum: Global Competitiveness Index 2017-2018.
- US Department of State: Investment Climate Statement 2017.
- EY: Portugal Attractiveness Survey 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.
- The Law Reviews: Portugal Anti-Bribery and Anti-Corruption Review 2017.
- Global Legal Insights: Portugal Bribery & Corruption 2017.
- Reuters: "Portuguese ex-PM Socrates Indicted on Corruption Charges", 11 October 2017.
- Portugal Resident: "Top Brass Among 16 Arrested in Air Force Mess Corruption Probe", 5 July 2017.
- Reuters: "Portuguese Judge Rules Angola's Vice President Must Stand Trial for Corruption", 22 June 2017.
- Portugal Resident: "Golden Visa Trial Opens", 16 February 2017.
- Algarve Daily News: "Sócrates to Sue the State over Trial Delay - It's Political Persecution", 3 February 2017.
- Freedom House: Freedom in the World 2016.
- Transparency International: Global Corruption Barometer 2016.
- GRECO: Fourth Evaluation Round Report Portugal 2016.
- Bertelsmann Stiftung: Sustainable Governance Indicators - Portugal Report 2016.
- World Economic Forum: Global Enabling Trade Report 2016.
- US Department of State: Human Rights Practices Report 2016.
- CMS: Guide to Anti-Bribery and Corruption Laws 2016.
- Reuters: "Portugal's Judicial Makeover: The Reform that Flattered to Deceive", 22 November 2016.
- World Economic Forum: Global Competitiveness Report 2015-2016.
- OECD: Portugal Follow-Up to the Phase 3 Report & Recommendations 2015.
- Transparency International: Government Defense Anti-Corruption Index 2015.
- The Big Story: 'Former gov't official arrested in Portuguese corruption case', 10 July 2015.
- First Post: 'Portuguese Minister to be charged in money-laundering 'golden via' scandal', 3 July 2015.
- Eurobarometer: Flash Eurobarometer 374 – Businesses Attitudes towards Corruption in the EU, 2014.
- Eurobarometer: Special Eurobarometer 397 – Corruption Report, 2014.
- European Commission: EU Anti-Corruption Report: Annex 22, Portugal, Feb. 2014.
- Reuters: "Portuguese ex-PM Socrates Arrested in Corruption Probe", 22 November 2014.
- The Economist: 'All that glitters', 17 November 2014.
- Transparency International: Global Corruption Barometer 2013.
- Transparency International: National Integrity System Assessment Portugal 2012.