Doubling tax-related development assistance by 2020

Norway is well on track to fulfilling the Addis Tax Initiative pledge of doubling tax-related development assistance by 2020. In addition, we are working constructively in the relevant multilateral arenas to ensure coherent policies that support domestic resource mobilisation in developing countries.

Completion Status:
Fulfilled

Commitment filtering:

Specific: ✔ yes

The commitment refers to the work in progress to fulfil the Addis Tax Initiative pledge by 2020. It is specific regarding the policy area it focuses on, the initiative to implement and the timeframe to achieve it.

Measurable: ✔ yes

To double Norway’s tax-related development assistance is considered a concrete and measurable action. Even if the efforts in multilateral fora do not respond to a measurable and concrete strategy, they can still be monitored as part of Norway’s general commitment to support domestic mobilisation in developing countries.

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Last updated: 30 August 2022
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Evaluation:

This commitment has been monitored at two levels: 1) the promise of doubling tax-related development assistance by 2020, and 2) the work in multilateral arenas to ensure coherent policies that support domestic mobilisation in developing countries.

The commitment refers to Norway’s ongoing work supporting tax assistance as a development strategy. and responds to the country’s commitment to the Addis Tax Initiative, which emerged from the Third International Conference on Financing for Development in Addis Ababa in 2015. Norwegian efforts in this regard are motivated by the belief that robust tax systems are essential for better resource distribution and to make countries more independent of development assistance.[1]

In terms of doubling tax-related development assistance by 2020, the Norwegian State Secretary of International Development, Aksel Jakobsen, stated in 2019 that during the previous two years, the government had doubled its efforts for better tax systems. [2] He made this declaration when Norway donated US$10 million to the World Bank to reform tax systems in fragile states in September 2019.[3] A review by several civil society organisations assessing Nordic countries’ support for domestic resource mobilisation through multilateral institutions confirms this data, showing an increase in Norway’s total development assistance for domestic resource mobilisation from US$15 million in 2015 to over US$30 million in 2019.[4]

As shown in the graph provided by Norad below, Norway’s support for domestic revenue mobilisation at the time of making the commitment in 2015 was 134 million NOK (US$13.2 million), reaching 299 million NOK (US$29.4 million) in 2019. In 2020 it decreased to 240 million NOK (US$23.6 million) due to the Covid-19 pandemic, but Norad argues that it picked up by 2021, though official statistics about this increase are not yet available.

This achievement was the result of the scaling-up plan approved by the Minister of Development in 2018 to fulfil the commitment made under the Addis Tax Initiative by 2020.[5] To fulfil this commitment, Norway followed a strategy of using multiple partnerships with national resource institutions, civil society, academia, the private sector, and multilateral and regional organisations. The Ministry of Finance led this work, but the scaling-up and institutional cooperation with developing countries was also enabled by collaboration between Norad and the Norwegian Tax Authority.

Norway’s tax-related development assistance is delivered not only in financial terms, through leading multilateral organisations on tax such as the World Bank, the OECD, the IMF and the UN, but also through knowledge exchange, capacity building and supporting civil society through the Tax Programme of the Knowledge Bank led by Norad.[6]

In terms of ensuring policy coherence in multilateral arenas, there is no specific strategy for coherence at national or international level, although Norwegian ministries and agencies participate in a number of international processes on policy coherence around domestic revenue mobilisation. Of particular importance are the four organisations that form the Platform for Collaboration on Tax: the World Bank, the IMF, the OECD and the UN, supported by Norway’s Tax for Development Programme.[7] Norway actively participated and financially supported the task force on tax and development established by the OECD to advice the OECD Development Assistance Committee (OECD DAC).[8] Through the Nordic-Baltic Constituency at the World Bank, Norway continues to push for a reinforced approach in the bank’s work on tax governance and administration, to counter tax avoidance, corruption and illicit financial flows. In addition, in 2020, Norway, as President of the UN Economic and Social Council, and Nigeria, as President of the UN General Assembly, initiated the establishment of a high-level panel on financial accountability, transparency and integrity.[9] This work was preceded by the UN resolution on Illicit Financial Flows, proposed by Norway and the G77 group headed by Nigeria, which for the first time in a UN General Assembly included tax avoidance as well as tax evasion.[10] The importance of taxes in Norway’s multilateral cooperation in recent years is also highlighted in the Foreign Ministry report, Norway’s Role and Interests in Multilateral Cooperation 2018-2019.[11]

 

Recommendations
  • Design or make public a strategy to ensure policy coherence to support domestic revenue mobilisation in developing countries, and to coordinate initiatives on the topic in multilateral fora in which Norway participates.
  • Support developing countries in finding new ways to constructively engage with citizens so tax systems are perceived as legitimate – for example, by sharing best practices in citizen engagement and creating spaces for dialogue between governments and civil society. Many studies have shown that a technical approach is not enough and proactive engagement is necessary.[12]
  • Tailor aid on tax reform to the economic, political and institutional factors in each country, and include measures to prevent potential diversion of local capacities, reduction of local ownership and lack of coherence of reform programmes.