Doubling Development Support

In the Addis Tax Initiative we have committed to doubling Finland’s support for strengthening developing countries’ domestic resource mobilisation by 2020.

Completion Status:
Not fulfilled

Commitment filtering:

Specific: ✔ yes

This commitment is specific, as it identifies financial “support for strengthening developing countries’ domestic resource mobilisation” as a concrete policy instrument. The Addis Tax Initiative is an existing partnership based on a declaration, which sets the scope of the action.[1] The government had already committed to doubling its funding before the IACC in 2018. However, as the commitment implementation was still ongoing, it is considered specific.[2]

[1] Addis Tax Initiative, Finland, https://www.addistaxinitiative.net/es/node/87

[2] Addis Tax Initiative, Finland, https://www.addistaxinitiative.net/es/node/87

Measurable: ✔ yes

The commitment includes the measurable action of “doubling Finland’s support for strengthening developing countries’ domestic resource mobilisation” from the 2015 level by 2020. According to the official website of the Addis Tax Initiative, in 2015, the Finnish funding was $4.538 million (roughly €4.3 million) which would imply a 2020 target of $9.076 million (roughly €8.6 million).[1] This is in line with the amount in Euro published in 2020 in the Ministry of Foreign Affairs’ Taxation for development Action Programme 2020–2023 (€8.6 million).

[1] Addis Tax Initiative, Finland, https://www.addistaxinitiative.net/profile/finland

Last updated: 30 June 2022
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Evaluation:

The Addis Tax Initiative is a multi-stakeholder partnership that aims to foster collective action to improve tax systems considering recognised gaps in development finance.1 The initiative’s actions are organised under the Finnish Tax and Development Action Programme (TDAP).2

Finland joined the Addis Tax Initiative in 2015 with $4.538 million (roughly €4.3 million) of funding. The aim of the commitment was to double this funding by 2020, to the level of $9.076 million (roughly €8.6 million). This target was not met, as the development aid roughly remained at the level for 2015 or even below. In 2018 the funding was only $1.834 million (€1.7 million) and in 2019 it was only $4.835 (€4.5 million).3 This was due to cuts in the development aid budget under the previous Finnish government of 2015-2019. In 2020, the Addis Tax Initiative has not published detailed funding data on country contributions yet.4 Therefore, the commitment is currently not fulfilled. However, the Ministry of Foreign Affair’s latest Taxation for development Action Programme 2020–2023 report committed to reaching the level of €8.6 million by 2022.5

 

Challenges to effective commitment implementation
The delay in reaching the funding level shows that budgetary commitment to development finance depends on the government’s political will. The budget cut was part of the more comprehensive austerity policy of Juha Sipilä’s centre-right government, which lowered development funding from the 2014 level of €1.171 billion to €817m by 2016, cutting almost a third of the overall development funding. Some areas, such as multilateral partnerships, lost nearly 60 per cent of funding between 2014 and 2016.6 The unpredictability of political changes makes it difficult to set long-term funding targets.

 
Opportunities to accelerate commitment implementation
The centre-left government led by Sanna Marin has raised development funding and aims to reach the previous funding levels set by the commitment. Financing for the Addis Tax Initiative is expected to meet the initial target by 2022.7 This increase in funding also provides opportunities to target the financing of new projects, following the OECD Development Co-operation Directorate selection criteria. Coordination of funding with other OECD and Addis Tax Initiative countries will be essential to prevent overlaps.

 
Recommendations
  • Ensure that the funding models offer future predictability, avoiding political backtracking on their objectives – e.g., by providing a multi-year funding framework.
  • Introduce the risk-management measures outlined in the MFA’s new risk-management policy to publicly funded projects with partner countries.
  • Regularly assess the effectiveness of projects funded under the Addis Tax Initiative. The previous evaluation took place in 2021 and found that Finland’s support primarily targeted the bureaucratic level and technical capacity building, while shying away from more sensitive discussions, such as addressing ineffective taxation of the wealthy in the countries that Finnish development policy supports.8 Future actions should address these gaps.
  • Create synergies with other EU countries and national programmes with similar objectives of improving tax systems and tackling illicit financial flows. Seek collaborative funding opportunities or draw on lessons learned from other projects and programmes to identify successful models for the funding

Sources:
  1. Addis Tax Initiative Commitments and Principles
    30 Jun 2022
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  2. Ministry of Foreign Affairs Finland Taxation for Development: Finland’s Action Programme 2020–2023
    30 Jun 2022
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  3. Tax Justice Network Nordic aid for mobilising tax revenues for development and reducing inequality
    30 Jun 2022
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  4. Addis Tax Initiative Finland
    30 Jun 2022
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  5. Ministry of Foreign Affairs Finland Taxation for Development: Finland’s Action Programme 2020–2023
    30 Jun 2022
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  6. Ministry of Foreign Affairs Finland Table 1. Development cooperation appropriations and payments 1989-2020
    30 Jun 2022
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  7. Ministry of Foreign Affairs Finland Taxation for Development: Finland’s Action Programme 2020–2023
    30 Jun 2022
    ↩
  8. Ministry for Foreign Affairs Finland, Evaluation of Economic Development, Job Creation and Livelihoods, Volume 1.2 Annexes
    30 Jun 2022
    ↩