People being what we are, yes, I would say somebody will take money and do the shell game to use the income for purposes that it was not intended for.    This is human, not government.   Corporation regularly fire people for not using their funds properly, we just don't read it in the paper. 

I agree that there are corrupt practices in all large organizations.   An organization, public or private, doesn't change the nature of human beings.

*I think tax avoidance is more typical form of political favoritism.   If you convince the public that all tax's are bad, then 'lowering tax's' will be seen as a positive.   (even though it still means 'picking sides' and changing the competitive balance).   Tax avoidance is an easier sell than adding tax's.