Tax for Development, the Addis Tax Initiative and the Nordic model – reducing inequality

First, I would like to thank you for the report – which we will study carefully.

Reducing poverty and inequality is the key objective of Norway’s development policy. My road map as Minister of International Development is Agenda 2030 and the Sustainable Development Goals. Although there has been much progress, we are not on track to achieving these goals by 2030.

Estimates show that 44 million lives could be at stake if we continue business as usual. In other words, 44 million lives could be saved if we ramp up our efforts.

The financing gap is huge, particularly in low-income countries. Coordinated mobilisation of foreign and domestic sources is needed in order to reach the SDGs. This means improving saving and investment, enhancing consumption and promoting sustainable growth.

A well-functioning tax system can help to alleviate poverty and inequality in two ways. First, through the way tax is collected, and the composition of the tax base. Second, through the indirect effect of public expenditure at different levels.

When it comes to tax policy and administration, there is considerable room for improvement in most developing countries. According to various sources, including the IMF, tax collection can be increased by 3-5 % of GDP in many countries.

Getting rid of inefficient tax exemptions and incentives is often part of the solution. Effective taxation of natural resource-based industries remains a major challenge in many developing countries.

Let me give you three examples of how Norway’s tax-related development policy works in practice – bilaterally, multilaterally, and in cooperation with civil society, respectively:

The national tax authorities in Zambia report that  their cooperation with the Norwegian Tax Administration has helped them to reassess taxes and to increase tax collection by around USD 80.6 million during the period 2011 to 2016. The total cost of this project was around  USD 8.4 million, which means that the cost-benefit ratio was an impressive 1:10.

In the same period, Zambia quadrupled the number of tax audits it carried out and doubled the number of employees in the tax authorities.

Similarly, the Norwegian Tax Administration helped the tax authorities in Tanzania clear a large backlog of tax audits in the mining sector from 2012 to 2015, at a cost of around USD 1.1 million. The result was a number of improvements, with one company paying an estimated USD 127 million in additional taxes following reassessment. In other words, the cost-benefit ratio was at least 1:100, taking into account only the largest tax reassessments and collection.

At the multilateral level, Norway – in cooperation with Nigeria and other partners – has championed UN resolutions on illicit financial flows and asset recovery.

This work has been advanced through a series of seminars and conferences in New York with UN member states and various stakeholders.

It has been further strengthened by Norway’s promotion of resolutions on anti-corruption under UNCAC in Vienna. These resolutions link the agenda of anti-money laundering and other criminal activity. Norway has also supported efforts in Africa, under the leadership of the Mbeki Panel and facilitated by UNECA, to promote regional advocacy and analytical work and make policy recommendations for change.

The third arena I would like to mention is our cooperation with civil society. Norway places significant emphasis on the role of civil society. In 2019, we have an anticipated portfolio of NOK 68 million to support civil society organisations working in this area.

Many key ideas and proposals have been initiated by civil society. At the country level, emphasis has been on the extractive industries – petroleum and mining.

Civil society organisations also play an important role in public debates about – and scrutiny of – contracts, tax regimes, company payments to governments, and the wider social and environmental responsibility of the business sector.

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We are acutely aware that in order to eradicate extreme poverty by 2030, more attention must be given to fragile states and low-income countries in sub-Saharan Africa. According to current projections, up to 80 % of the world’s poor will be living in fragile states by 2035.

Norwegian tax experts are often not the best equipped to work in these contexts directly. We are therefore developing a portfolio of key multilateral partners such as the World Bank, the IMF and the UN so that we draw on their expertise and presence in fragile states.

Wherever possible, we engage with these experts in our bilateral efforts and seek to integrate the domestic resource mobilisation perspective into our policy and programming for fragile states.

Domestic resource mobilisation, including the issue of illicit financial flows and asset recovery, was a key topic at IDA18, which resulted in specific commitments. In the upcoming discussions and negotiations for the IDA19 cycle, these issues will figure even more prominently.

Norway addresses the topic of domestic resource mobilisation in dialogue and funding discussions with the IMF and regional development banks such as the African Development Bank.

Everyone must do their part if we are to pick up the pace and reach the Sustainable Development Goals. In the Addis Tax Initiative, Norway made the commitment to double our tax-related development assistance from 2015 to 2020. We are now on track to achieve this goal a year ahead of time. We urge all other signatories to increase their efforts to fulfil their commitments in this area.

I would also like to challenge the tax and development community to come up with the facts we need to formulate new political commitments on domestic resource mobilisation that will enable us to reach our goals by 2030. Norway is ready to champion this effort and to be a frontrunner in the global arena. I am very much looking forward to the discussion.

Thank you.