African Union countries could send more children to school if governments cut tax incentives to corporations

ActionAid at the Pan-African High-Level Education Conference, Nairobi, 25-27 April 2018.

As the Pan-African High-Level Education Conference (PACE) commences in Nairobi, Kenya, ActionAid urges governments to reduce harmful tax incentives that drain funding from children’s education in their countries - and reminds them of promises they made as part of the Sustainable Development Goals to deliver inclusive quality education for all by 2030.

Recent progress has been made with the Global Partnership for Education (GPE) Financing Conference in Senegal in February where countries and donors pledged to increase funding. But ActionAid believes much more could be done if governments looked beyond the share of the budget spent on education and increased the overall size of national budgets by increasing their domestic tax base.

“For years many of these governments have been making progress towards the target of spending 20% of their national budgets on education – but 20% of a small pie is a small amount,” said ActionAid’s Julie Juma, Education Programme Manager.

“If we are to mobilise the money that is urgently needed for education, countries must now focus on ways to expand their domestic tax base.”

“Some quick breakthroughs can be made to increase tax revenues by eliminating harmful tax incentives given to multinational corporations. This alone could enable some countries to double their education budget,” adds Juma.

Evidence collected by ActionAid shows that, for many countries, governments are giving away vast sums in harmful tax incentives and even just a portion of these sums, if allocated to education, could ensure all girls and boys have access to quality public education. Mozambique, Nepal and Tanzania are losing more than half a billion dollars a year to tax incentives. Tanzania, for example, loses 15 times more in tax incentives each year than it would to educate all girls currently out of school.

ActionAid research finds that governments in Sub-Saharan Africa may be losing around US$38.6 billion a year or 2.4% of their GDP to their own regime of corporate tax incentives - equivalent to nearly half their current education spending. Many of these tax exemptions, such as tax holidays, are given to very wealthy foreign companies to encourage investment. However, many business surveys have found tax incentives effectiveness highly doubtful. Foreign companies are more attracted by other factors such as infrastructure and rule of law, which government needs to tax to create.

ActionAid will present the findings of the report Making tax work for girls’ education: How and why governments can reduce tax incentives to invest more in girls’ educationat PACE on 26 April. It will set out the link between education and tax justice and recommending sustainable ways for African governments to dramatically increase financing for education by tackling tax policies that are too favourable to multi-national companies. At the meeting, ActionAid will also launch publications making the case for linking tax justice and education finance in Malawi, Mozambique and Tanzania.

The UN warned in 2016 that, unless developing countries increase their domestic tax intake to better finance public education, it will take them another fifty years to meet their commitments under the Sustainable Development Goals that promised all girls and boys should be able to complete free quality primary and secondary education by 2030.

Globally 263 million children are out of school. Of these, 61 million children are of primary school age and 5 million more girls that boys are currently receiving no primary education. Many schools, especially in the world’s poorest countries lack electricity, trained teachers, adequate teaching, learning materials, basic infrastructure and sanitary conditions to ensure a good quality education for all.

ActionAid urges governments to ensure that their tax systems are fairer, more progressive and better able to raise the funds needed to keep the pledges they have made at the GPE to ensure that all children – especially girls – are able to fully enjoy their right to a good quality education.

Editors' notes
  • ActionAid has produced short video stories through the Norwegian Agency for Development Cooperation (Norad) project, that shows how girls, teachers and communities have been engaged in this project are fighting for better education provision (especially for girls) which is sustainably funded through fair taxes - and calling on others to join them. The videos are for Mozambique, Tanzania, Malawi and Nepal. Links to the videos can be found here: Malawi Tanzania Nepal Mozambique English and Portuguese version

  • The Pan High Level meeting (25 – 27 April) will be attended by Ministers of Education and Finance, International non-government communities, Regional economic blocs and education activists from all the 55 African Union member states.
  • In 2015, world leaders committed under SDG4 to ensuring that every single child in the world would have access to free, quality education by 2030 - yet there are currently 263 million primary and secondary age children and youth out of school around the world. Of these, 61 million children were of primary school age; 5 million more girls than boys are currently receiving no primary education (UNESCO). Sub- Saharan Africa has the world’s highest rate of children ages 6-17 not in school (32%).

  • An estimated US$ 340 billion every year is required to achieve universal pre-primary, primary and secondary education. While donors have an important role to play, 97 percent of that money will need to come from domestic budgets to sustainably achieve SDG 4 (The Education Commission)

  • At the recent Global Partnership for Education (GPE) Financing Conference, held in Senegal in February 2018, developing countries pledged to increase domestic funding to education by more than US$30 billion. They increased projected budgets for education from a total of US$80 billion to US$110 billion in the period 2018-2020 (roughly an extra $10 billion a year). Donor organisations and countries pledged an additional US$2.3 billion to the GPE fund.

  • Increasing the size of government revenues must be linked to clear commitments to increase the share of budgets spent on education and action to ensure that spending is sensitively targeted to help the most marginalised and actually arrives in practice.

  • ActionAid has also researched into other countries. In the Tax, privatisation and the right to education report it is shown that in Ghana, Kenya, Uganda and Pakistan just a small portion of the sum lost to harmful tax incentives could pay for all out of school children to have an education.

ANNEX: SUMMARY OF ACTIONAID’S KEY RECOMMENDATIONS

It is time for governments to keep their promises and prove they are working towards financing public, equitable, inclusive and free education. Governments must actively mobilise more resources for education and citizens must hold them accountable by monitoring the implementation and allocation of resources to ensure education 2030 goals are met. ActionAid calls on African governments to keep their promises and take the following measures to ensure public education is free, compulsory and of good quality and that there are no economic barriers to prevent families sending their children and in particular girls to school.

  1. Increase the SIZE of national budgets by;
  • Announcing a timetable to reach a tax-to-GDP ratio of at least 20% by 2020.
  • Maximising revenue available for investment in public services.
  • Addressing inequality by building progressive and expanded domestic tax systems.
  • Reviewing tax and royalty agreements in the natural resource sector.
  • Closing loopholes which enable tax avoidance and evasion in the private sector.

  1. Increase the SHARE of the budget allocated to education by:
  • Announcing a timetable to reach an allocation of at least 20% of government spending (6% of GDP) to education by 2020.
  • Publishing a clear breakdown of budget allocations by sub-sector online.

  1. Increase the SENSITIVITY of national education budgets by
  • Reviewing education plans. Budgets and proposals and spending to address educational inequalities.
  • Ensuring a positive impact on girls and women, persons with disabilities, indigenous communities, refugees and displaced persons and other disadvantaged groups, through gender and inclusion audits.

  1. Increase the SCRUTINY of national education budgets by:
  • Supporting increased analysis of education budgets and performance by civil society and promoting greater accountability

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