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Tax takes over the development agenda

Bank notes in Zambia’s unit of currency, Kwacha.
Photo: Thomas Marott / Danida

It is not just in Denmark and Europe that tax, tax evasion and tax fiddles – such as the Luxembourg dodge – become a hot political issue in 2014. Tax is an issue that shoots up the agenda also in developing countries and in development cooperation – and Denmark helps deliver the ammunition. In May, the American think-tank, Global Financial Integrity, publishes a Danida-financed study concluding that private companies are cheating Africa’s poorest nations out of billions of kroner. Five Danish priority countries – Ghana, Kenya, Mozambique, Tanzania and Uganda – have been badly hit and together have been cheated out of no less than DKK 350 billion due to shady trade transactions. The study estimates that the total illegal money flows over a 10-year period constituted 6.6 per cent of Ghana’s GNP, 7.8 of Kenya’s, 9 per cent of Mozambique’s, 9.4 per cent of Tanzania’s and 7.1 per cent of Uganda’s.

The study is just one element of Denmark’s support to international efforts to create greater transparency within the taxation field. The study causes an international stir and underlines that international efforts to stop tax evasion and shady business transactions are essential if we are to succeed in financing the Sustainable Development Goals that are to replace the Millennium Development Goals.

There is also increased focus on tax in the individual developing countries, and here Denmark takes action in the form of targeted efforts in, among others, Ghana, Tanzania and Mozambique. The professional expertise of the Danish tax authorities is also mobilised, and the Danish Tax and Customs Administration (SKAT) welcomes a delegation of tax officers from Tanzania.

From Tanzania, reports emerge of spectacular results of the tax cooperation over the last few years. From 1999 to 2013, tax revenues increased by 1,000 per cent! It should be noted, however, that the increase has occurred from an extremely low starting point, and that countries such as Tanzania are still far from being able themselves to finance, for example, basic education and health care for their population. Nevertheless, the story indicates the potential, even in poor countries, for increasing tax revenues that will enable them in the long term to finance their own development.