Legal and Regulatory Framework - Denmark

This grant will support ATAF’s strategic work to promote efficient and effective tax administrations in Africa to improve the living standards of the people of Africa. ATAF works to improve the capacity of African tax administrations to achieve their revenue objectives, advance the role of taxation in African governance and state-building, provide a voice for African tax administrations in international tax collaboration as well as develop and support partnerships between African countries and development partners. The grant will provide core support to ATAF from 2015-2017 with 1.5 million DKK annually, i.e. a total core grant of 4.5 million DKK. In 2015, the Danish support will enable ATAF to initiate work on trade mispricing, the main facilitator of illicit financial flows (IFFs).

At the institutional level, ATAF has been growing at a relatively fast level in the last couple of years due to increased international focus on taxation. Denmark will strive to promote strong donor coordination among ATAF and its donors.

This grant will support Tax Justice Network Africa’s (TJN-A) efforts in carrying out its vision of a new Africa in which tax justice prevails and ensures an equitable, inclusive and sustainable development, which enables all its citizens to lead a dignified life as stated in TJN-A's strategic plan for 2013-2016. The work on TJN-A focuses on increasing the transparency and accountability of the global and national financial systems, enhancing the voice and participation of African citizens to shape tax policies, building the capacity of civil society to engage African governments in tax policy and address regressive domestic tax systems. The grant is a three-year grant of 3 million DKK and part of the government’s new implementation plan on tax and development launched in April 2015.

At the institutional level, TJN-A has experienced impressive growth but also struggled to identify and hire staff with the needed competencies. TJN-A is very aware of this and focuses on internal institutional strengthening as one of their five main objectives. TJN-A should also be aware of targeting its advocacy messaging towards its different constituencies.

The project on BEPS, i.e. Base Erosion and Profit Shifting, aims to combat double non-taxation by providing countries the tools needed to ensure that profits are taxed where economic activities generating the profits and where value is created, while at the same time give business greater certainty by reducing disputes over the application of international tax rules and standardizing requirements. This grant will support the OECD in implementing its Strategy for Deepening Developing Country Engagement in the BEPS project, which was welcomed by the leaders of the G20 Summit in November 2014. The strategy for involving developing countries consists of the three main pillars of (i) direct participation in the Committee on Fiscal Affairs and its subsidiary bodies on the BEPS project; (ii) supporting regional networks of tax policy and administration officials in five specific regions; and (iii) capacity building support through mentoring and the development of toolkits.

At the institutional level, there is a risk that the Committee of Fiscal Affairs is not familiar with development cooperation and aid effectiveness.

The NAMA Facility was set up by Germany and the UK in 2013. The overall objective set out for the facility is to facilitate transformation towards low carbon pathways in developing countries with reference to the internationally agreed goal to keep global warming below two degrees Celsius compared with pre-industrial levels. This facilitation is achieved by supporting the realization of ambitious and innovative NAMAs (National Appropriate Mitigation Actions) in developing countries and emerging economies.

Through the NAMA Facility, Denmark seeks to attribute to demonstration short-term of successful leverage of finance for implementation of ambitious and transformational NAMAs. The facility provides funding for technical support and institutional and regulatory capacity development combined with or closely linked to development financial instruments to leverage public and private finance.

The NAMA Facility is at present the predominant international financing mechanism for supporting the implementation of NAMAs in particular as the Green Climate Fund is not yet operational. The UK and DE have up until now allocated Euro 119 million and both countries pledged additional funding for 2015/2016 in December 2014 at COP20 in Lima. The Facility is open for other multi- and bilateral donors. Through Climate Envelope 2014 Denmark joined the NAMA Facility as an additional donor providing financing amounting to DKK 73.8 million for a third call announced by the Facility at COP20. The EU Commission also contributed Euro 15 million to the Facility.

So far five projects in Colombia, China, Kenya, South Africa And Guatemala has been selected by the board and have started the in-depth appraisal phase. By the end of 2015, the NAMA Facility had five full-fledged projects under implementation from the previous calls in Costa Rica, Indonesia, Chile, Peru and Mexico and other projects in Thailand, Burkina Faso and Tajikistan are being developed.

The Programme (BSPS IV) has three components with a total of 6 engagements:

• Agricultural Markets Development under which a Trust (AMDT) will engage in a number of value chains and thereby facilitate the equivalent of 100,000 full-time jobs and increase income for 300,000 farmers. The immediate objective is defined: The incomes and employment opportunities of poor women, men, and young people are increased in agricultural value chains in Tanzania. Contributors are DANIDA, SIDA, Irish Aid and Swiss SDC.

• Improved Business Climate has the immediate objective: (i) Improved business climate for the private sector, inducing businesses to grow and create employment opportunities; (ii) Local Investment Climate-focused on critical constraints to business growth and economic development at the district level by helping the local authorities and business communities to identify and prioritizes the constraints. Dodoma and Kigoma Regions are the focus areas; (iii) BEST-Dialogue will work with business organizations and government to improve business environment through regulatory reform, improved implementation and effective and efficient enforcement; and (iv) CTI/DI Twinning arrangement will strengthen the institutional capacity of CTI as a key private sector organization vis-à-vis the Government of Tanzania.

• Access to finance has the immediate objective: (i) Farmers, enterprises, and employees increase their access to quality financial services; (ii) Financial Sector Deepening Trust (FSDT) has since 2004 financed the development of pro-poor financial services and new financial products for MSMEs; and (iii) Private Agricultural Sector Support (PASS) operates on commercial terms offering a combination of credit guarantees and business development services to Tanzanian farmers and agribusinesses. The present upscaling of PASS businesses are based on new financial products with a significant potential for increasing the number of beneficiaries.

Danish Aid for Trade has supported several projects by TradeMark East Africa (TMEA) that promote cross-border and regional trade in East Africa. Development assistance from Denmark has co-funded TMEA since 2011 both on a regional basis across the whole EAC, and also bilaterally to Kenya and Uganda.

Denmark’s trade facilitation support through TMEA is multi-faceted. It covers a variety of complementary activities to make trade easier, more efficient, and less costly. This work is consistent with international efforts led by the WTO to facilitate trade, and hence to increase economic growth, job creation and household incomes in developing countries.

The TMEA programmes and projects specifically concern Denmark’s support for women cross-border traders; harmonization of product standards; one-stop border posts; automation to modernize trade procedures; and a new Trade Logistics Information Pipeline initiative carried out in partnership with the Danish shipping company, Maersk.

If product standards are not harmonized, it can have negative economic effects, adding to the non-tariff barriers to trade. Therefore, in coordination with national stakeholders, TMEA has implemented The Standards Harmonization and Conformity Testing Programme, which supports the Bureau in achieving regional harmonization of EAC standards. It improves testing capacities to increase trade competitiveness across the region, by reducing the time and cost of testing, thereby contributing to fueling trade in the region. The programme has since 2011 provided capacity-building to the EAC Partner States to increase the quality and competitiveness of EAC-manufactured products. TMEA has further supported laboratories to increase the number of possible tests; created awareness about standards and quality to stakeholders, and harmonized priority standards to boost trade.

The programme directly increased the number of harmonized standards by 79 and improved the effectiveness of national bureaus by widening their testing scope by an average of 32 additional testing parameters. This resulted in a reduction in testing costs from an average of $500 down to $205, and the time to release testing certificates from an average of 38 days down to 10 days. An independent programme evaluation indicates that, as the number of harmonized standards increased, the number of products certified on regional standards also increased. The mutual recognition of certification marks across the EAC greatly reduced the average clearance time of import and export of products in the region. Thus improving the regional market access for producers which in turn further stimulates regional competition.