Hearing the voice of developing countries on global tax policy
Finland's new Taxation for Development Action Programme 2020–2023 was published on 9 June. The speakers in the online publishing event commended the demand for tax responsibility and emphasised strengthening Africa’s own taxation capacity and listening to the voices of developing countries when it comes to global tax policy.Picture: The illustrations in the action programme are excerpts from a series on Tax and Human Rights created by Ria Singh Sawhney and Anna Bulman of Picture Human Rights. The series was inspired by the book Tax, Inequality and Human Rights (OUP 2019) edited by Professor Philip Alston and Nikki Reisch.
“Finns love taxes,” said Satu Santala, Director General of the Ministry for Foreign Affairs’ Department for Development Policy, in the publishing event of the new Taxation for Development Action Programme. This long-term love affair is based on the Nordic model being built on a functional tax system that allows funding public services, social security and infrastructure that benefits everyone.
According to Minister for Development Cooperation and Foreign Trade Ville Skinnari, the coronavirus crisis has made the importance of the public sector and a functional tax system even more evident. “Right now, no one is campaigning for a small state,” said Skinnari in his speech. Rather, the crisis requires all countries to increase the mobilisation of domestic resources.
In her speech pre-recorded for the event, Jutta Urpilainen, the commissioner in charge of international partnerships of the European Union, said that taxation needs to increasingly be used to reduce inequality.
However, many developing countries have weak taxation capabilities. Most of the work force and companies are in the informal economy. In addition, developing countries lose more income due to the tax evasion of multinational enterprises than they receive in development aid.
African countries have taken action to strengthen their taxation capacity and to stem illicit financial flows. Finland's Taxation for Development Action Programme aims to support this work. Finland will double its funding for strengthening the taxation capacity of developing countries and directs aid specifically to Africa.
Fixing tax systems and tax responsibility
Developing tax systems is the main goal of Finland's Taxation for Development Action Programme. Finland aims to achieve this goal by expanding cooperation with the African Tax Administration Forum (ATAF), among other measures. The Finnish Tax Administration will continue its project with the Tanzanian tax administration and expand its work to other African countries, in cooperation with ATAF.
As decided in the Government Programme, Finland requires tax responsibility and transparent country-by-country reporting of financial statements and tax information of all companies who receive development cooperation funds. The Ministry for Foreign Affairs is in the process of drawing up these common guidelines for all private sector development cooperation instruments. Finland also funds the cooperation of African non-governmental organisations for promoting tax justice.
Outi Hakkarainen, an expert from Fingo, the umbrella organisation for Finnish development cooperation organisations commended the programme’s requirement of tax responsibility for companies. She also emphasised that the guidelines should clarify which measures are not in the spirit of the law and are thus prohibited for companies that receive development cooperation funds.
Africa’s own voice
In his speech, ATAF’s Executive Secretary Logan Wort underlined that Finland and other rich industrialised countries should listen to the voice of African countries and other developing nations. Aggressive tax planning and the digitalisation of international trade pose challenges that require international treaties. Developing countries must have a sufficient capacity to negotiate in order for those treaties to benefit them.
This is one of the main goals of Finland's Taxation for Development Action Programme. The aim is to bring together governments, researchers and citizens in order to strengthen the tax culture in Africa and defend joint African stances in questions of global tax policy.
The Taxation for Development Action Programme director Timo Voipio noted that fostering developing countries’ taxation capacity and tax cooperation is possibly the best exit strategy for development cooperation. “The idea of development cooperation is to make itself gradually unnecessary,” Voipio said.
The underlying idea of the Taxation for Development Action Programme is that, in the future, poor countries could fund a constantly larger portion of their development needs with their own tax income.