Increasing tax revenues
The problem
Domestic resource mobilisation is one of the most important ways to facilitate sustainable development. A tax base provides governments with essential money to spend on infrastructure and public services, such as health and education. As governments in low- and middle-income countries are modernising their tax systems and broadening their tax base, the tax-to-GDP ratio is generally increasing. However, according to the IMF, compared to the OECD country average of over 34 percent in 2017, the tax-to-GDP ratio is less than half in most low- and middle-income countries.
Link to SDGs
Norfund’s investments contribute both directly and indirectly to achieving the UN Sustainable Development Goal 17, Target 17.1:
"Strengthen domestic resource mobilization, including through international support to developing countries, to improve domestic capacity for tax and other revenue collection."
Results 2018
Taxes and fees are paid by Norfund’s portfolio companies and by companies in their value chains.
- NOK 13.9 billion paid in taxes and fees: In 2018, an amount equivalent to NOK 13.9 billion had been paid in taxes and fees by the companies in which Norfund is invested, both directly and through funds. 37 per cent was paid as corporate income tax and 63 percent was paid as other transfers, such as sales taxes, withholding taxes, net VAT, royalties, licence fees, and social security payments.
- NOK 2.5 billion increase in 2018: From the end of 2017 to the end of 2018, the total taxes and fees paid by companies with two consecutive years of reporting increased by NOK 2.5 billion, or 29 per cent.
- Most taxes paid in Africa: 66 per cent of the taxes and fees were paid by companies operating in Africa; Kenya, Tanzania and Uganda alone accounted for 26 per cent. 25 per cent were paid by companies in Asia, and 9 per cent by companies in Latin America. A total of NOK 4.3 billion was paid in taxes and fees by companies operating in least developed countries.
| Country | Taxes paid, NOK |
|---|---|
| Angola | 50 000 000 |
| Bangladesh | 1 799 000 000 |
| Bolivia | 192 000 000 |
| Cambodia | 476 000 000 |
| Colombia | 69 000 000 |
| Costa Rica | 92 000 000 |
| El Salvador | 154 000 000 |
| Ethiopia | 46 000 000 |
| Ghana | 408 000 000 |
| Guatemala | 38 000 000 |
| Honduras | 17 000 000 |
| India | 117 000 000 |
| Kenya | 2 484 000 000 |
| Laos | 206 000 000 |
| Mozambique | 34 000 000 |
| Myanmar | 16 000 000 |
| Nicaragua | 256 000 000 |
| Nigeria | 187 000 000 |
| Other* | 180 000 000 |
| Other, Africa* | 4 039 000 000 |
| Other, Latin America* | 664 000 000 |
| Other, Asia* | 410 000 000 |
| Panama | 12 000 000 |
| Peru | 93 000 000 |
| Rwanda | 80 000 000 |
| South Africa | 287 000 000 |
| South Sudan | 5 000 000 |
| Tanzania | 657 000 000 |
| Uganda | 470 000 000 |
| Zambia | 380 000 000 |
| Total | 13 921 000 000 |
*This includes data from countries with less than 4 reporting enterprises as well as companies with operations in several countries in the region.
Norfund’s tax policy
A responsible tax policy is fundamental to Norfund´s operations. Our tax policy is based on the principles of the Norfund Act of 1997, Norfund's statutes, and EDFI's principles for responsible tax in developing countries.
