Skip to content

Increased tax revenues to developing countries

People have a lot of different opinions about the Danish tax burden, but there is also an understanding of the fact that public services such as schools, hospitals, elderly care and roads cannot be financed without paying taxes. Now, Denmark wants to help developing countries in their efforts to collect taxes and combat tax evasion so that they are able to finance welfare systems and democratic societies on their own.

A visit in the New Fashion grocery shop, which is owned by Lydia Mbilinyi. She is a member of the Faraja Trust. The Faraja Trust was established in 1989 and consists solely of women. Its purpose is to support women by providing them with loans intended to improve their opportunities for starting up activities and increasing their income.

A visit in the New Fashion grocery shop, which is owned by Lydia Mbilinyi. She is a member of the Faraja Trust. The Faraja Trust was established in 1989 and consists solely of women. Its purpose is to support women by providing them with loans intended to improve their opportunities for starting up activities and increasing their income.

Photo: Mikkel Østergaard/Danida

Many developing countries are experiencing growth. A number of African countries have enormous deposits of oil, gas and minerals and ought to be capable of financing a great deal of their own development.

The traditional understanding has been that the Western part of the world pours money into Africa in the form of development cooperation and private investments without getting much in return. But the fact is that the African continent has been a net creditor to the rest of the world for decades.

Minister for Development Cooperation Christian Friis Bach states: “Over the last 30 years, around DKK 6 quadrillion has illegally seeped out of Africa as a result of crime, corruption and tax evasion. This has undermined the potential for growth in the economy. The fruits of the growth that many African countries are experiencing do not end up in the state coffers because the tax systems in the countries are vague, the taxes too low and the ability to collect the taxes and combat tax evasion too limited.

“Developing countries miss out therefore on greatly needed funds that could have financed development, and they are stuck in poverty and aid dependency. Ultimately, the goal of development cooperation is to make development cooperation superfluous. But we can only do that if we also help developing countries get their tax systems to function and help them combat tax evasion.”

The strategy for Danish development cooperation, “The Right to a Better Life”, stresses that Denmark will strengthen the efforts in the fight for closing tax loop holes, addressing illegal transfers of capital and promoting the equitable taxation of natural resources in the poorest countries of the world.

The goal of the Danish efforts is to contribute to placing taxes and development and combating illegal transfers of capital higher up on the development policy agenda, both internationally and in cooperation with our priority countries. Results have already been achieved. In cooperation with other countries and organisations, Denmark has assisted countries such as Tanzania and Mozambique in improving their tax collection, and it is working.

For example, Tanzania’s tax revenues increased from around 10 per cent of GDP in 2000 to just under 16 per cent in 2012. A reform of the tax system and the tax administration in Mozambique has resulted in a significant improvement in tax collection in the country, which is expected to comprise up to 22 per cent of GDP this year, which is a high percentage in an African context. Today, the Mozambique Revenue Authority is one of the best-functioning institutions in the country.

Through various ongoing and new initiatives, approx. DKK 230 million will be allocated to strengthen the efforts in this area. Below, you will find the implementation plan for the Danish initiatives.

  • ""

    Danida Transparency

  • ""

    International conference on global inequality

  • ""

    Denmark combats violence against women and girls

  • ""

    Danish companies support responsible textile production in Bangladesh

  • ""

    Inauguration of the UN city in Copenhagen

  • ""

    The Crown Princess in Zaatari

  • ""

    Denmark contributes to green growth in Africa

  • ""

    Denmark increases its aid to Syrian refugees

  • ""

    Denmark’s participation in EU development cooperation

  • ""

    Development cooperation (also) benefits us

  • ""

    Increased synergy between development cooperation and trade promotion

  • ""

    Opportunity Africa

  • ""

    New initiative: Business Project Development

  • ""

    Emergency relief to the Central African Republic