And the time period, and the mock Eastern European setting, and the aesthetic...

It's clearly playing on Western tropes of depressing, bureaucratic totalitarian communist regimes

Creator of the game in an interview or something says all the countries are communist

For the same reason that many portrayals of fictional bad guy armies are fascist. Since it would be boring to go really into the material conditions of the state, aesthetically fascist is enough to show that they're fascist.

Likewise, aesthetically Soviet-style communism/state capitalism is enough to invoke that feeling in Papers Please.