Opening speech by Minister Toivakka at the seminar "Tax Refunds to Developing Countries"

Opening speech by Minister for Foreign Trade and Development Lenita Toivakka at the seminar "Tax Refunds to Developing Countries", on the 4th of December, 2015. The keynote speech was given by Professor Mick Moore, CEO of the International Centre for Tax and Development.

Dear Professor Moore and panelists, Ladies and gentlement,

Yesterday, a great majority of the 5,6 million Finns received tax returns on their bank accounts. Today we are here to talk about returning to developing countries the taxes they would be entitled to collect.

Therefore, it is a great pleasure for me to open this event with speakers of such high standing and wealth of expertise. Tax and development is a key international topic now and for the years to come.

I have participated in all three global conferences of 2015: The Financing for Development conference in Addis Ababa, the Sustainable Development Summit in New York, and this week, the climate conference in Paris.

I have become absolutely convinced that the challenges of sustainable development require more coherent global policies and joint action in innovative broad-based partnerships.

Agenda 2030 combines the sustainable development goals and development financing. The agenda is highly ambitious. We need to think differently, and work together, as we need to mobilize new resources in order to reach the ambitious goals.

Every country bears responsibility for its own sustainable development. For many, this means increased focus on domestic resource mobilization. In developing countries, increasing the volumes of domestic public financing is a key priority.

In the Addis Tax Initiative, Finland among other donors committed to doubling its tax support by 2020. All signatories committed to more coherent policies. This is particularly needed to reduce international tax avoidance and evasion, to curb illicit financial flows and to fight corruption. These are issues where an individual developing country cannot find solutions on its own.

Sub-Saharan Africa received last year 40 billion USD as development assistance. At the same time, 60 to 100 billion US dollars left these countries as illicit financial flows.

In May, Finland's new government committed to new development policy priorities. One of them is strengthening democratic and effective societies. Strengthening the tax base in developing countries is an important element in this work.

Taxation is also interlinked with another priority, private sector development: when stronger private sector creates more jobs, companies and employees pay more taxes. This can lead to better services, better work-force and thus create well-being in the society.

We believe that strategic interventions combining financial support and technical expertise can create significant impact. I am pleased to see that this is backed by your research, Professor Moore, as well as by the evidence produced by eg. OECD and the International Tax Compact.

Ladies and gentlemen,

What do all the political commitments require? From us and the developing countries? In my view, the answer is coherence of policies and capacity at several levels.

Firstly at the global level, developing countries need support to participate at the joint work to implement the G20/OECD recommendations for new global tax rules. Taxing multinational companies for the value created in a certain country is the key in the new rules. Developing countries also need capacity support to benefit from the new rules.

I fully agree with Professor Moore in underlining the need of government agencies on one hand, and private sector and civil society on the other hand to participate in the whole chain of activities to increase tax revenues and spend these revenues better.

Therefore, the second capacity level is support to reforms of tax administrations, policies and legislation, and the third level is about civil society empowerment. This is why we are determined about supporting developing countries in building democratic, effective and transparent institutions.

The Ministry for Foreign Affairs will define an action plan to specify where and how we support the Tax and Development agenda. This will cover multilateral policy influence, country strategies, cooperation with international organisations and NGOs, and research.

Based on our present interventions on tax and development, the action plan will have four tracks: 1) policy influence on the global tax agenda and developing countries, 2) capacity building of tax administrations, 3) civil society empowerment and 4) research, e.g. country-specific analysis, illicit financial flows and impact studies.

Finland actively influences decisions that expand developing countries' fiscal space, at the OECD, the Multilateral Development Banks and the UN. We support regional tax capacity building in Africa by African Tax Administrations' Forum, ATAF. ATAF helps its 40 members to benefit from the new global tax rules and strengthen their tax administrations. Finnish Tax Administration is our partner with technical assistance.

Together with INGOs like Oxfam and Financial Transparency Coalition, we help empower parliaments and civil societies – including media – in some of our partner countries and regionally to demand accountability from governments on better use of increased tax revenue.

And finally, research is key in providing evidence for policy decisions. We presently cooperate with Global Financial Integrity, Tax Justice Network and the WIDER Institute.

Ladies and gentlemen,

The chairperson of OECD’s Development Assistance Committee, Mr. Erik Solheim, always reminds us that if all developing countries managed to increase their tax revenues by a little more than one percent, that sum would be equal to a doubling of global ODA. I believe this gives us an idea of how important the theme of today’s seminar is.

Thank you for your attention! 

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