Norwegian aid actors are today exempt from tax on goods and services in developing countries, but now the government will remove the exemption. Thus, organizations such as Norwegian People's Aid must pay millions to governments in the south. More for tax means less for aid projects, the Ministry of Foreign Affairs admits.
Norwegian People's Aid
(THIS ARTICLE IS MACHINE TRANSLATED by Google from Norwegian)
Exception. Aid organizations and authorities have long been exempt from tax when purchasing goods and services in developing countries. Now the Foreign Ministry wants to remove the exemption to give the poor countries more money in the Treasury.
New Time's online edition can today say that the Ministry of Foreign Affairs in a letter to "Norway's voluntary organizations" dated 1. March launches a "proposal to lift tax exemptions for aid-financed goods and services".
In practice, this will mean that aid organizations such as the Red Cross, Norwegian Church Aid, Norwegian People's Aid and the Development Fund will start paying taxes to, among others, Mozambique, Burundi and the Palestinian territories.
- Developing countries need to bring in more tax and strengthen their tax systems. This in turn will make it easier for them to collect other tax revenues. Many of these countries are rich in natural resources, but they miss out on large revenues due to gaps in the tax rules, says State Secretary for Development Affairs at the Ministry of Foreign Affairs, Ingrid Fiskaa (SV), to Ny Tid.
- Has consequences
Withdrawing the tax exemption has consequences, says Orrvar Dalby, Acting Secretary General of Norwegian People's Aid.
- Aids will be channeled in a slightly different way than today. There will be a little less money for program work and more for taxes. But this is a necessary reorganization, which Norwegian People's Aid welcomes, says Dalby to Ny Tid.
The refugee aid is more restrained in its response.
- We support of course the desire to build a functioning tax administration in partner countries. Whether it is right to tax aid is, however, a complicated question. Based on the inquiry from the Ministry of Foreign Affairs, we are now working to map the consequences it will have in the countries we are operating in, and we are also considering the possibility of distinguishing between long-term assistance and humanitarian aid when it comes to tax exemptions, explains Eirik Christophersen, head of NRC information section.
In seven countries first
The letter states that the red-green government is promoting the proposal to strengthen developing countries' tax revenues and counteract illegal capital flows.
“In line with this We are now looking more closely at concrete measures that can contribute to the goal of increasing the control that developing countries have over their own resources. One proposal we have for consideration is that Norway waives the tax exemption for development assistance-financed goods and services. That would be an important signal ", it is stated in the letter, which is signed by State Secretary Fiskaa.
Initially, seven countries will benefit from taxes from aid organizations:
"Initially we are considering implementing this in countries that qualify for Norwegian budget support, ie Mozambique, Zambia, Tanzania, Uganda, Malawi, Burundi and the Palestinian Territories. Such an action will have the best effect if it is carried out on the broadest possible basis, and we hope to involve civil society and other donor countries in this. "
Moves money
Humanitarian aid in emergencies must still have tax exemption, it is emphasized in the letter. Fiskaa invites the organizations to provide input by 15 March. She wants to know what consequences the change will have for their work. But Fiskaa admits that the removal of the tax exemption will move some of the development assistance funds away from the specific projects.
- Yes, a consequence of this is that a larger part of the development assistance goes to taxes and fees. But even if this is a twist, the money will still go to the recipient countries, she emphasizes.
- Can this lead to more money being channeled to corrupt regimes?
– There is always a danger of corruption, and we focus on that all the time. But it is not a given that the risk of corruption is greater by more money being channeled into the tax system. We also plan to abolish the tax exemption in countries that have been approved for budget support from Norway, says Fiskaa.
Want to include more donor land
budget support is a form of support given directly to the recipient country's authorities, and it presupposes democratic budget processes in the country. Those who currently qualify for such support are the aforementioned seven countries. It is these who in the first instance can benefit from increased tax revenues from Norwegian development assistance. Tanzania is the country that receives the most aid from Norway annually, and the country can thus increase its tax revenues significantly if the proposal is implemented.
The goal is that too other donor countries abolish the tax exemption for aid. But Norway will not wait for others, Fiskaa assures.
- That Norway takes the lead and abolishes the tax exemption can contribute to more countries doing the same. It is important for this measure to have the effect we want. ■
