Anyone who has been here for any meaningful time knows that corruption is, sadly, an ongoing reality—perhaps prevalent as tacos and tequila. In 2017, Transparency International ranked Mexico 135 out of 180 countries in perception of corruption. A payment to make a traffic stop vanish could be a ‘baby’ example of this.
Beyond that, you should know that federal law makes it a crime for U.S. persons to knowingly offer anything of value to a foreign official with corrupt intent, in connection with business. The Foreign Corrupt Practices Act, in place since the late 70’s, is becoming become somewhat of a darling in the American prosecutor’s arsenal.
This is one of those laws that follow us no matter where we U.S. citizens live. Living abroad does not immunize Americans from FCPA. In fact, it was enacted specifically to curb corrupt payments overseas.
Which payments are subject to FCPA? Payments that directly or indirectly advance a business purpose. Large corporations and small businesses are all game. FCPA applies to payments intended to induce or influence a foreign official to use his or her position “in order to assist … in obtaining or retaining business for or with, or directing business to, any person. There are some exceptions for items of minimal or no value.
Winning a contract, evading payment of taxes or penalties, circumventing importation rules, getting expedited permit review, could all be actions taken to obtain or retain business.
So it’s payments related to a business or venture, yours or someone else’s. Morals aside, “mordidas” while here on vacation are not FCPA matters. But if a payment is in connection with a business or has a business purpose, one should pay attention.
Corrupt intent is one for the purpose of influencing, directly or indirectly, a foreign official’s decision making, or inducing misuse of an official’s position. Where there’s corrupt intent, FCPA penalizes paying, offering, or promising to pay money or anything of value. These can be anything, not just cash; it could be a gift card, trip or vacation, not just to the official, but to others associated with the official.
‘Foreign officials’ could be typical government employees, the kind we usually recognize– at any level. Importantly, persons employed by state owned or controlled entities are also included. You can see the net is wide.
Lastly, these payments are not deductible business expenses. The message here, “don’t bribe”—is a superb suggestion indeed!
Orlando Gotay is a California licensed tax attorney (with a Master of Laws in Taxation) admitted to practice before the IRS, the U.S. Tax Court and other taxing agencies. His love of things Mexican has led him to devote part of his practice to federal and state tax matters of U.S. expats in Mexico. He can be reached at firstname.lastname@example.org or Facebook: GotayTaxLawyer. This is just a most general outline. It is informational only and not meant as legal advice.