The World Bank Tax Administration Modernization Project (P127734) REPORT NO.: RES50197 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF TAX ADMINISTRATION MODERNIZATION PROJECT APPROVED ON JUNE 6, 2016 TO REPUBLIC OF MOLDOVA GOVERNANCE EUROPE AND CENTRAL ASIA Regional Vice President: Anna M. Bjerde Country Director: Arup Banerji Regional Director: Lalita M. Moorty Practice Manager/Manager: Daniel J. Boyce Task Team Leader(s): Iryna Shcherbyna, May Cabilas Olalia The World Bank Tax Administration Modernization Project (P127734) ABBREVIATIONS AND ACRONYMS DLI Disbursement Linked Indicator DLR Disbursement Linked Result DB Doing Business FM Financial Management IBRD International Bank for Reconstruction and Development IDA International Development Association IPF Investment Project Financing ISR Implementation Status and Results Report IT Information technologies ITMS Integrated Tax Management System MoF Ministry of Finance PBC Performance-Based Condition PDO Project Development Objective RBF Results Based Financing SDR Special Drawing Right STS State Tax Service TAMP Tax Administration Modernization Project VAT Value added tax The World Bank Tax Administration Modernization Project (P127734) N o t e DATA BASIC t o Information Product T a ID Project Financing Instrument s P127734 Investment Project Financing k Original EA Category Current EA Category T Not eRequired (C) Not Required (C) a Approval Date Current Closing Date m 06-Jun-2016 s 30-Nov-2023 : T Organizations h Borrower e Responsible Agency f Republic of Moldova o l l Project Development Objective (PDO) o w PDO Original To improve i revenue collection, tax compliance and taxpayer services in the Republic of Moldova n Current PDO g To support business survival and sustain employment in the context of the COVID-19 pandemic, through temporary tax s relief, and improve taxpayer services in the Republic of Moldova e OPS_TABLE_PDO_CURRENTPDO Summary c Status of Financing (US$, Millions) t Net Ln/Cr/Tf i Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed o IBRD-86250 n 06-Jun-2016 28-Jun-2016 25-Jan-2017 30-Nov-2023 12.58 12.53 0 s IDA-58290 06-Jun-2016 28-Jun-2016 25-Jan-2017 30-Nov-2023 7.42 6.26 1.13 a r e s y s t e The World Bank Tax Administration Modernization Project (P127734) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No A. P r N o I. PROJECT o j STATUS AND RATIONALE FOR RESTRUCTURING t e e c Status A. Project t t 1. o The S Tax Administration Modernization Project (TAMP) was approved in June 2016 and restructured twice (in JuneT 2019 t and September 2020). The TAMP, financed by an International Development Association (IDA) Credit (IDA- a a 58290) of US$ 7.42 million and an International Bank for Reconstruction and Development (IBRD) loan (IBRD-86250) s 12.58 million, for a total Bank financing of US$ 20 million was originally designed to improve revenue collection, of US$ t compliance, and taxpayer services in the Republic of Moldova. tax k u T 2. s TAMP was first restructured in 20191 to improve its performance through better aligning the Project The e activities with the ongoing tax policy and modernization activities, taking into consideration those supported by other a and avoiding duplication. The 2019 restructuring introduced a Results-Based Financing (RBF) with Disbursement donors1. T m Results (now Performance-Based Conditions (PBC)) under Component 1 “Tax Policy, Tax Administration Reform, Linked h ands Operational Development”; revised the Results Framework; changed the implementation approach for the :e Integrated Tax Management System (ITMS) solution; and extended the Project closing date by 23 months to November 30, E T 2023, to complete and operationalize the ITMS. The 2019 restructuring, which came into effect on January 16, 2020, did not change the Project Development Objective (PDO). However, overall progress towards achievement of na the PDO and implementation progress were downgraded to moderately unsatisfactory in the May 2020 dx Implementation Status and Results Report (ISR) due to implementation delays in the procurement of the ITMS and oA non-completion of planned activities under the non-RBF components. Specifically, the procurement of services to f d bidding documents for ITMS was suspended, making impossible further progress under Component 3: develop sm “Information Technology (IT) Infrastructure and System Modernization” which accounted for US$ 15.76 million or 78 y i of Bank financing prior to the 2020 restructuring. percent sn 3. t i The second restructuring in 20202 refocused the Project from development of the ITMS towards supporting the Government’s es efforts in mitigating the negative fiscal impact of COVID-19 at the request of the Ministry of Finance. The 2020 restructuring, approved in September 2020 by the Board of Executive Directors, included, inter alia, i) the mt introduction of a new US$ 15 Million results based component with PBCs - Component 5 “Maintaining employment g r and business survival in the context of COVID-19 pandemic” - supporting the implementation of payroll and value addede a tax (VAT) refund subsidy programs (US$ 3 million of the IDA financing and US$ 12 million of the IBRD financing); nt ii) revision of the PDO and results framework; iii) revision of the scope and cost of project investment components; and iv) ereallocation between disbursement categories, disbursement arrangements, and project management i r o 1 World Bank. REPORT NO.: RES34344. (June 2019) a 2 World nBank. REPORT NO.: RES41570 (September 2020) t M e o d d c oe The World Bank Tax Administration Modernization Project (P127734) arrangements. The restructuring came into effect on December 23, 2020. Following the 2020 Restructuring, progress towards achievement of the revised PDO and overall implementation progress significantly improved. Project performance was upgraded out of problem project status to fully satisfactory, as indicated in the January 2021 ISR. This satisfactory performance continues, with achievements in implementation of tax-related COVID-19 programs supported under Component 5, and other ongoing tax reforms under Component 1. Both these results-based components are nearing completion and accounting for 93 percent (US$ 17.49 million) of total current disbursements (US$ 18.75 million) against Bank financing as of April 30, 2022. The remaining disbursements for PBCs will be completed in the Bank’s fiscal year 20233 . Most of current Investment Project Financing (IPF) activities have been completed, with US$1.26 million disbursed. 4. With respect to the remaining IPF activities, during the December 2021 mission, the new State Tax Service (STS) leadership requested to strengthen the Project’s results and prospects for sustaining them. While improving the STS’s information technology (IT) capability was part of the original design of the TAMP, previous protracted action from STS led the Government in 2020 to request the cancellation of the originally planned ITMS and reallocation of the available resources of US$ 15 million to support more urgent tax-related COVID-19 pandemic relief measures. In consideration of a renewed strategic aspiration to have an IT system that meets international good practice, STS has subsequently decided to drop four out of six planned procurement packages that have not yet been launched and re-direct the resources to conduct an STS IT Gap Capability Assessment (Assessment) and the follow-up development of technical specifications for ITMS. Activities suggested to be dropped include the procurement of: i) additional equipment for the training center, ii) computer and system operating equipment; iii) a remote monitoring system, and iv) data loss prevention solutions. The cancellation of these procurements is justified by the lack of urgent operational need by the STS. Moreover, procurement of new software and hardware need to be informed by the results of the Assessment and identified requirements of the future integrated tax management solution. All remaining and proposed new IPF activities are expected to be completed by the current closing date of November 30, 2023. The STS has already prepared the Terms of References for selecting a consulting firm to conduct the Assessment, cleared it with the Bank, and is currently coordinating with the e-Governance Agency per national regulations. The procurement for the consultancy work on the Assessment was launched in February 2022 with the contract expected to be signed in July 2022 and work completed by the end of calendar year 2022. 5. Financial Management (FM). The Project’s financial management arrangements continue to be satisfactory, with FM risk remaining Moderate. The Project is in compliance with the financial reporting and auditing requirements: acceptable interim financial reports have been timely received and unqualified audit opinions were provided on the Project financial statements which were prepared as of December 31, 2020. Since Project effectiveness in January 2017 there were three audits of Project financial statements. The regular audit of Project financial statements for 2020 will be complemented with verification of eligible expenditures underpinning PBCs. This PBCs-related audit is underway with the report expected by July 2022. There are no overdue audit reports. 6. Environmental and Social Safeguards. There is no change in the safeguards policies and the Project will continue to be a category “C” post-restructuring. The Project restructuring will not involve any activities that may change such category. 3Under Component 1, the remaining milestone for PBC 5 “Introducing an electronic taxpayer survey tool” (PBC 5.2 for US$ 150,000) is expected to be fully achieved by December 2022. Under Component 5, two remaining milestones under PBC 7 “Established legal frameworks and the transparent mechanisms for implementing the temporary tax relief to businesses to mitigate negative fiscal impact of COVID-19 pandemic” (PBC 7.5-7.6 for a total of US$ 1 million) related to final analytical reports are expected to be completed and disbursed by July 2022. The World Bank Tax Administration Modernization Project (P127734) B. Rationale for Restructuring 7. The proposed restructuring will primarily revise the results framework to replace a PDO-level indicator that is measured using World Bank Doing Business (DB) data and an intermediate indicator related to Component 3 (IT Infrastructure and System Modernization) given the changes in priority activities by the STS. A new intermediate outcome indicator for Component 3 will be introduced to capture desired outcomes from the new activities. In addition, there will be minor revisions to component costs to adequately finance the proposed new activities under Component 3. The legal description for Component 3 will require a revision to reflect the new activities. 8. Due to the discontinuation of the World Bank DB report, the proposed Level 2 restructuring aims to replace the PDO indicator “Time required to comply with taxes,” which was measured using the Doing Business data. On November 26, 2021 the Bank informed the Ministry of Finance (MoF) of the discontinuation of the DB Report and proposed to replace the DB-related indicator through restructuring. Currently, the PDO outcome area of “improving taxpayer services” is measured by four indicators - three of which are PBC-based and reflect the improvements from the tax service (supply) side; while the DB-based indicator, “Time required to comply with taxes”, reflects the improvements from the taxpayer’s (demand) side. The MoF, STS and the Bank agreed to move an intermediate indicator “Taxpayer satisfaction” to the PDO level, as a replacement for “Time required to comply with taxes” to ensure that the demand side of taxpayer service improvements is captured. The final taxpayer satisfaction survey will measure the changes in taxpayer satisfaction with STS services and performance compared to the baseline survey conducted in 2018. The final survey, similar to the baseline, will be conducted separately among legal entities and individuals focusing on questions covering access, transparency, efficiency and quality of service delivery. The STS has started preparation of the final survey which is currently planned for the second half of 2022. No modifications to the PBCs will be required. 9. The STS has also revised the list of remaining IPF activities to provide adequate resources for the IT Capability Gap Assessment and a follow-up development of technical specifications for ITMS. As noted above, four non-urgent procurements of hardware and software were cancelled, including the purchase of the remote monitoring system solution. Accordingly, the intermediate indicator related to the remote monitoring system linked to Component 3 (IT Infrastructure and System Modernization), “Assigned tasks to inspectors are completed and monitored continuously,” will be deleted. This indicator will be replaced by the indicator “Set foundation for future STS digital modernization strategy”. Following this revision of IPF activities, components’ coverage and cost estimates will be slightly adjusted (See Detailed Changes table below). II. DESCRIPTION OF PROPOSED CHANGES 10. The proposed Level 2 restructuring requires revision to the following aspects of the Project: (a) results framework; and (b) activities within components and costs. The PDO will not be revised. Results Framework 11. The Results Framework will be revised as follows: the PDO-level indicator “Time required to comply with taxes” will be replaced with “Taxpayer satisfaction”, upgraded from an intermediate outcome level. Another intermediate indicator “Assigned tasks to STS inspectors are completed and monitored continuously” will be dropped and replaced by a new indicator “Set foundation for future STS digital modernization strategy”. Figure 1 below presents the Project’s updated results chain and is reflected in the revised results framework below. Figure 1. TAMP: Results Chain / Theory of Change The World Bank Tax Administration Modernization Project (P127734) PDO: To support business survival and sustain employment in the context of the COVID-19 pandemic, through temporary tax relief, and improve taxpayer services in the Republic of Moldova Outcomes Support business survival and sustain Taxpayer services improved employment in the context of the COVID-19 pandemic, through temporary tax relief PDO Measured as: Measured as: Indicators Maintained employment and - Taxpayer satisfaction business survival in the context of -Improved usability of the STS website (PBC/Disbursement Linked Indicator COVID-19 pandemic, by temporary (DLI) 3) providing tax relief (PBC 6) -Strengthened capacity of STS staff to deliver taxpayer services (PBC/DLI 4) -Introduced an Electronic Taxpayer Survey Tool (PBC/DLI 5) Intermediate Established legal frameworks and -Increased nominal value of the specific and minimal excise rates for all Results transparent mechanisms for tobacco products under tariff position 240220 (PBC/DLI 1) implementing the temporary tax -Ensured that supplies of goods by insolvent subjects are taxed with VAT on relief to businesses to mitigate the the reverse charge principle (PBC/DLI 2) negative fiscal impact of the COVID- -Number of hits to the STS website 19 pandemic (PBC 7) -Training program delivered through a distance learning system for the most important workflows developed -Decrease in tax arrears - Set foundation for future STS digital modernization strategy Activities -Establishing the relevant legal Introduce -Develop new STS -Procure soft frameworks to efficiently and changes to the website and hardware effectively implement the tax Tax Code of -Conduct taxpayer -STS IT Capacity relief programs, introducing a Moldova and surveys and procure Gap public awareness campaign and enact them gadgets for Assessment ensuring transparent reporting on taxpayers’ -Development the implementation of the satisfaction of technical programs assessment specifications -Sustaining business operations -Procurement of for ITMS and employment levels in the communication context of COVID-19 equipment Components Component 5. Component 1. Component 2. Component 3. Maintain employment and Tax Policy, Tax Institutional IT business survival in the context of Administration Development Infrastructure COVID-19 pandemic Reforms and and System Operational Modernization Development Component 4. Project Management and Change Management Components and Costs 12. The existing Components 1 (Support Tax Policy, Tax Administration Reforms and Operational Development), and Component 5 (Maintaining employment and business survival in the context of COVID-19 pandemic) will remain unchanged. 13. The allocated amount to Component 2 (Institutional Development) will be reduced from US$ 0.65 million to US$ 0.61 million. The Component will no longer support the procurement of equipment for the training center as originally The World Bank Tax Administration Modernization Project (P127734) stated in the Procurement Plan, and relevant funds will be assigned to Component 3. It is noted that the Project previously funded videoconferencing equipment and laptops to support training delivery, which are considered adequate at this time by the STS. 14. Component 3 (IT Infrastructure and System Modernization) activities will be revised and cost allocation increased from US$ 1.18 million to US$ 1.27 million. The funds intended for the procurement of: i) remaining computer and system operating equipment, ii) the remote monitoring system, and iii) a data loss prevention solution, as stated in the Procurement Plan following the 2020 restructuring, will be re-directed towards two new activities under Component 3: i) STS IT Capability Gap Assessment that will inform a new STS IT Strategy and its implementation roadmap, and ii) based on the Assessment, development of technical specifications for ITMS. The Project description in the Legal Agreements will need to be amended to include these two new activities. Specifically, the legal description for Component 3 will be revised to read as follows: “Part 3. IT Infrastructure and System Modernization Provision of support for (i) the purchase and installation of tax administration modernization tools, including the provision of relevant hardware and software, and training regarding, its functions, and (ii) the carrying out of a capability gap assessment to the STS IT and the development of technical specifications for an integrated tax management system.” 15. The scope of Component 4 (Project Management and Change Management) will remain unchanged but the cost allocation will be reduced from US$ 0.17 million to US$ 0.12 million. The remaining US$ 0.05 million will be assigned to Component 3. The STS utilizes its own staff to perform most of the functions envisaged under project management. The remaining activities are the annual financial audits and remaining funds are sufficient for these purposes. N o III. SUMMARY t OF CHANGES e t Changed Not Changed o Framework Results ✔ T Components and Cost ✔ a Implementing s Agency ✔ DDO k Status ✔ T Project's Development Objectives ✔ e PBCsa ✔ LoanmClosing Date(s) ✔ s Cancellations Proposed ✔ : T h e f The World Bank Tax Administration Modernization Project (P127734) Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Institutional development 0.65 Revised Institutional development 0.61 IT Infrastructure and system IT Infrastructure and system 1.18 Revised 1.27 modernization modernization Project management and change Project management and 0.17 Revised 0.12 management change management RBF. Support Tax Policy, Tax RBF. Support Tax Policy, Tax Administration Reforms and 3.00 No Change Administration Reforms and 3.00 Operational Development Operational Development RBF. Maintaining employment RBF. Maintaining employment and business survival in the 15.00 No Change and business survival in the 15.00 context of COVID-19 pandemic context of COVID-19 pandemic The World Bank Tax Administration Modernization Project (P127734) TOTAL 20.00 20.00 . The World Bank Tax Administration Modernization Project (P127734) . Results framework COUNTRY: Moldova Tax Administration Modernization Project Project Development Objectives(s) To support business survival and sustain employment in the context of the COVID-19 pandemic, through temporary tax relief, and improve taxpayer services in the Republic of Moldova Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 To improve taxpayer services Time required to comply 186.00 181.00 180.00 180.00 178.00 175.00 173.00 173.00 with taxes (Hours) Action: This indicator has Rationale: been Marked for Dropped following the discontinuation of the Doing Business report. Deletion The Manual is There is no a Manual on PBC: Strengthened the All eligible staff of implemented and all Manual on taxpayer services is capacity of the STS staff the STS, located in eligible staff of STS PBC 4 Taxpayer Services, developed and to deliver taxpayer all offices, are located in all offices the staff had no adopted by STS services (Text) trained (DLR 4.2). was trained specific trainings. (DLR 4.1) Pilot of the Evaluation report No tool for electronic taxpayer The tool is PBC: Introduced an on Roll-out results taxpayers’ regular survey mechanism implemented. Electronic Taxpayer PBC 5 for six months of feedback is in is completed and Survey Tool (Text) implementation place. training courses for (DLR 5.2). the designated The World Bank Tax Administration Modernization Project (P127734) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 staff to support the roll-out are conducted, and the roll-out is initiated (DLR 5.1) Single STS website launched with at least the following new features: - support to requirements of people with special There are two needs; websites available - single STS web (one for page which allow information only taxpayers to and another one Use of STS website PBC: Improved the submit income for the submission by taxpayers within New STS website is usability of the STS PBC 3 statements of tax declarations 1 month of its used by taxpayers website (Text) electronically by taxpayers); launch through their there are some personal account gaps in the created on the site; functionality of both websites. - STS website is synchronized with the state websites through the automated information exchange (open data); The World Bank Tax Administration Modernization Project (P127734) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 - new searching system which will reflect the final version of the legal documents, specifying all amendments and additions; - feedback mechanism is available through the online (chat). Legal entities – 83,9% and Satisfaction increase Individuals – - 10% (compared to 76,1%. Satisfaction baseline) Baseline survey increase - 10% conducted with (compared to data disaggregated Final survey baseline) Mid- Legal entities - by gender, results conducted with data project survey Taxpayer satisfaction 76,3% and and suggested disaggregated by conducted with (Text) Individuals – actions of the STS gender. Results and data disaggregated 69,2%. to address suggested actions of by gender; results weaknesses are the STS to address and suggested published on the weaknesses are actions of the STS STS website. published on the STS to address website. weaknesses are published on the STS website. The World Bank Tax Administration Modernization Project (P127734) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Rationale: This indicator is being adopted to replace the Doing Business Indicator on Time Required to Pay for Taxes and, more importantly, to capture the demand side Action: This indicator is (taxpayer perspective) of the desired outcome of improving taxpayer services. This indicator was originally an intermediate indicator and is now being upgraded New to a PDO level indicator. Support business survival and sustain employment in the context of COVID-19 through temporary tax re At least 75% of At least 75% of At least 75% of At least 75% of beneficiary firms beneficiary firms beneficiary firms At least 75% of beneficiary firms that received that received that received beneficiary firms that received subsidies based on 75% of beneficiary subsidies for the subsidies based on that received subsidies based on expanded VAT companies that No government payment of expanded VAT subsidies for the expanded VAT refund mechanism received subsidies Maintained employment programs to allowances / refund mechanism payment of refund mechanism from October 1 to under the payroll and business survival in support business salaries until up to August 31, allowances / from September 1- November 30, and expanded VAT the context of the COVID- continuity and August 1, 2020 2020 continue to salaries continue to PBC 6 30, 2020 continue 2020 continue to refund mechanisms 19 pandemic, by sustain continue to operate in operate in October to operate in operate in continued operation temporarily providing tax employment in the operate in August September 2020 2020 and maintain October 2020 and December 2020 and maintained relief (PBC 6) (Text) context of COVID- 2020 and maintain and maintain reported maintain reported and maintain employment at 60% 19 pandemic reported reported employment on at employment on at reported level compared to employment on at employment on at least 60% level least 60% level employment on at April 2020 least 60% level least 60% level compared to April compared to April least 60% level compared to April compared to April 2020 (DLR 6.4) 2020 (DLR 6.3) compared to April 2020 (DLR 6.1) 2020 (DLR 6.2) 2020 (DLR 6.5) PDO Table SPACE The World Bank Tax Administration Modernization Project (P127734) Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Institutional development Legal entities – 83,9% and Individuals – Satisfaction increase 76,1%. Satisfaction - 10% (compared to Baseline survey increase - 10% baseline) conducted with (compared to data disaggregated Legal entities - baseline) Mid- Final survey by gender, results 76,3% and project survey conducted with data Taxpayer satisfaction and suggested Individuals – conducted with disaggregated by (Text) actions of the STS 69,2%. data disaggregated gender. Results and to address by gender; results suggested actions of weaknesses are and suggested the STS to address published on the actions of the STS weaknesses are STS website. to address published on the STS weaknesses are website. published on the STS website. Action: This indicator has Rationale: been Marked for Upgraded to a PDO level indicator. Deletion Seven training Ten training Twelve training Training courses All identified The Training Distance courses to support courses to support courses to support with topics and distance learning Learning System for the The list of training the distance for the distance the distance content of major courses to support most important programs is not learning training training programs training programs importance for STS for the most workflows developed identified programs identified by identified by placed on the important (Text) identified by domains are domains are platform and workflows are The World Bank Tax Administration Modernization Project (P127734) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 domains are developed developed available for developed and developed. training. updated. Number of hits to the STS web-site (Number 3,570,004.00 3,900,000.00 6,900,000.00 7,000,000.00 7,050,000.00 7,100,000.00 7,150,000.00 (Thousand)) IT Infrastructure and System Modernization Assigned tasks to inspectors are completed and monitored 0.00 100.00 continuously (Percentage) Action: This indicator has Rationale: been Marked for Deleted because the activity contributing to the achievement of this indicator will no longer be pursued. Deletion Technical No evidence based Completion of IT Specifications for a Set foundation for future analysis to inform Tax Gap Capability new IT system for STS digital modernization future IT Assessment for the the tax strategy (Text) modernization tax administration administration are strategy prepared Rationale: Action: This indicator is To support efforts in defining the future IT modernization strategy for STS. New RBF: Support in tax policy and tax administration reforms Decrease in tax arrears 8.50 6.68 6.67 6.48 6.48 6.48 (Percentage) The World Bank Tax Administration Modernization Project (P127734) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 The Government of Moldova submitted to the Parliament a draft Law on Changes to the Tax Code Increased nominal value Specific rates and aimed at increasing of the specific and minimum rates by the specific rate The Parliament Increased specific minimal excise for all types of tobacco and the minimum Specific rates came PBC 1 approved the Law rates came into tobacco products under products as set up rate for both into effect (DLR 1.2) effect (DLR 1.3) tariff position 240220 in the Tax Code of cigarettes with (PBC/DLI 1) (Text) Moldova in 2017 filter and without filters on minimum 15% each for the year 2021 comparing to the excise rates from 2020 (DLR 1.1) Due to the legal gap in provisions The Government which stipulates Ensured that supplies of submitted to the The Parliament the process of goods by insolvent Parliament a Draft adopted the The adopted debt cancellation, subjects are taxed with Law on Changes to Changes to the Tax changes to the Tax PBC 2 at the time VAT on the reverse the Tax Code of Code and they Code came into transfer of charge principle (PBC/DLI Moldova (Title 3, come into effect. effect collected VAT 2) (Text) art 93,94,102,115) (DLR 2.2.) insolvent subject (DLR 2.1) does not have liquidity and this The World Bank Tax Administration Modernization Project (P127734) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 creates budget losses. Support Maintaining Employment and Business Survival in the Context of COVID-19 Pandemic Regulation on Regulation on implementation of implementation of subsidies for the Report on VAT Established legal Legal frameworks subsidies based on payment of Public awareness refund program Legal frameworks frameworks and for mechanisms to expanded VAT allowances/ campaign and Completion report covering payments are established and transparent mechanisms sustain tax refund mechanism Interim report on salaries is support to on the made for reports on for implementing the revenue collection is approved and VAT Refund approved and taxpayers in implementation of applications implementation of temporary tax relief to PBC 7 through support to among others program among others obtaining subsidies Payroll Subsidies received from start Payroll Subsidies businesses to mitigate for business continuity includes measures implementation is includes measures and VAT refunds program is made of program until and VAT refund the negative fiscal impact that ensured of eligibility published (DLR 7.5) of eligibility are introduced and public (DLR 7.4) December 2020 is programs are of the COVID-19 transparency are verification and verification and ongoing (DLR 7.3) published (DLR available pandemic (PBC 7) (Text) not available grievance grievance 7.6.) mechanisms (DLR mechanisms (DLR 7.2) 7.1) IO Table SPACE Performance-Based Conditions Matrix DLI IN01165906 ACTION PBC 1 Increased nominal value of the specific and minimal excise for all tobacco products under tariff position 240220 (PBC/DLI 1) Type of PBC Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Outcome Yes Text 700,000.00 0.00 Period Value Allocated Amount (USD) Formula The World Bank Tax Administration Modernization Project (P127734) Specific rates and minimum rates by types of Baseline tobacco products as set up in the Tax Code of Moldova in 2017 50% of DLI1 allocation;1.75% of total December 2019 The Parliament approved the Law (DLR 1.2) 350,000.00 financing. 20% of DLI1 allocation;0.7%of total December 2020 Increased specific rates came into effect (DLR 1.3) 140,000.00 financing. 30%of DLI1 allocation;1.05% of total December 2021 210,000.00 financing. August 2020 0.00 September 2020 0.00 October 2020 0.00 November 2020 0.00 February 2021 0.00 DLI IN01165914 ACTION PBC 2 Ensured that supplies of goods by insolvent subjects are taxed with VAT on the reverse charge principle (PBC/DLI 2) Type of PBC Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Outcome Yes Text 650,000.00 0.00 Period Value Allocated Amount (USD) Formula Due to the legal gap in provisions which stipulates the process of debt cancellation, at the time Baseline transfer of collected VAT insolvent subject does not have liquidity and this creates budget losses. The Parliament adopted the Changes to the Tax 70% of DLI2 allocation;2.275% of December 2019 455,000.00 Code and they come into effect. (DLR 2.2.) total financing. The World Bank Tax Administration Modernization Project (P127734) 30% of DLI2 allocation, 0.975% of December 2020 195,000.00 total financing. December 2021 0.00 0% August 2020 0.00 September 2020 0.00 October 2020 0.00 November 2020 0.00 February 2021 0.00 DLI IN01165916 ACTION PBC 3 PBC: Improved the usability of the STS website Type of PBC Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Output Yes Text 600,000.00 0.00 Period Value Allocated Amount (USD) Formula There are two websites available (one for information only and another one for the Baseline submission of tax declarations by taxpayers); there are some gaps in the functionality of both websites. Use of STS website by taxpayers within 1 month 75%of DLI3 allocation; 2.25% of total December 2019 450,000.00 of its launch financing. 25%of DLI3 allocation; 0.75% of total December 2020 150,000.00 financing. December 2021 0.00 0% The World Bank Tax Administration Modernization Project (P127734) August 2020 0.00 September 2020 0.00 October 2020 0.00 November 2020 0.00 February 2021 0.00 DLI IN01165917 ACTION PBC 4 PBC: Strengthened the capacity of the STS staff to deliver taxpayer services Type of PBC Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Output Yes Text 300,000.00 0.00 Period Value Allocated Amount (USD) Formula There is no a Manual on Taxpayer Services, the Baseline staff had no specific trainings. All eligible staff of the STS, located in all offices, 50%of DLI4 allocation; 0.75% of total December 2019 150,000.00 are trained (DLR 4.2). financing. 50%of DLI4 allocation; 0.75% of total December 2020 150,000.00 financing. December 2021 0.00 0% August 2020 0.00 September 2020 0.00 October 2020 0.00 November 2020 0.00 The World Bank Tax Administration Modernization Project (P127734) February 2021 0.00 DLI IN01165918 ACTION PBC 5 PBC: Introduced an Electronic Taxpayer Survey Tool Type of PBC Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Output Yes Text 750,000.00 0.00 Period Value Allocated Amount (USD) Formula Baseline No tool for taxpayers’ regular feedback is in place. Evaluation report on Roll-out results for six 80%of DLI5 allocation;3% of total December 2019 600,000.00 months of implementation (DLR 5.2). financing. 20%of DLI5 allocation; 0.75% of total December 2020 150,000.00 financing. December 2021 0.00 0% August 2020 0.00 September 2020 0.00 October 2020 0.00 November 2020 0.00 February 2021 0.00 The World Bank Tax Administration Modernization Project (P127734) DLI IN01165919 ACTION Maintained employment and business survival in the context of the COVID-19 pandemic, by temporarily providing tax relief PBC 6 (PBC 6) Type of PBC Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Output Yes Text 12,000,000.00 0.00 Period Value Allocated Amount (USD) Formula No government programs to support business Baseline continuity and sustain employment in the context of COVID-19 pandemic At least 75% of beneficiary firms that received subsidies based on expanded VAT refund mechanism up to August 31, 2020 continue to December 2019 0.00 operate in September 2020 and maintain reported employment on at least 60% level compared to April 2020 (DLR 6.2) At least 75% of beneficiary firms that received subsidies based on expanded VAT refund mechanism from September 1-30, 2020 continue 20,8% of DLI 6 allocation; 12,5% of December 2020 2,500,000.00 to operate in October 2020 and maintain the total financing reported employment on at least 60% level compared to April 2020 (DLR 6.3) At least 75% of beneficiary firms that received subsidies for the payment of allowances / salaries December 2021 continue to operate in October 2020 and 0.00 maintain reported employment on at least 60% level compared to April 2020 (DLR 6.4) At least 75% of beneficiary firms that received August 2020 subsidies based on expanded VAT refund 0.00 mechanism from October 1 to November 30, The World Bank Tax Administration Modernization Project (P127734) 2020 continue to operate in December 2020 and maintain reported employment on at least 60% level compared to April 2020 (DLR 6.5) 16,7% of DLI 6 allocation; 10% of the September 2020 2,000,000.00 total financing 20,8% of DLI 6 allocation; 12,5% of October 2020 2,500,000.00 the total financing 20,8 % of DLI 6 allocation; 12,5% of November 2020 2,500,000.00 the total financing 20,8% of DLI 6 allocation; 12,5% of February 2021 2,500,000.00 the total financing DLI IN01165920 ACTION Established legal frameworks and transparent mechanisms for implementing the temporary tax relief to businesses to PBC 7 mitigate for the negative fiscal impact of the COVID-19 pandemic (PBC 7) Type of PBC Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Outcome No Text 3,000,000.00 0.00 Period Value Allocated Amount (USD) Formula Legal frameworks for mechanisms to sustain tax revenue collection through support to business Baseline continuity that ensured transparency are not available Regulation on implementation of subsidies based on expanded VAT refund mechanism is approved December 2019 0.00 and among others includes measures of eligibility verification and grievance mechanisms (DLR 7.2) Public awareness campaign and support to 16,7% of DLI 7 allocation; 2,5% of the December 2020 taxpayers in obtaining subsidies and VAT refunds 500,000.00 total financing are introduced and ongoing (DLR 7.3) The World Bank Tax Administration Modernization Project (P127734) Completion report on the implementation of December 2021 Payroll Subsidies program is made public (DLR 0.00 7.4) Interim report on VAT Refund program 10% of DLI 7 financing; 1,5% of the August 2020 300,000.00 implementation is published (DLR 7.5) total financing Report on VAT refund program covering payments made for applications received from 10% of DLI7; 1,5% of the total September 2020 300,000.00 start of program until December 2020 is financing published (DLR 7.6.) 23% of DLI67allocation; 3,5% of the October 2020 700,000.00 total financing 23% of DLI7 allocation; 3,5% of the November 2020 700,000.00 total financing 16,7% of DLI7 allocation; 2,5% of the February 2021 500,000.00 total financing Verification Protocol Table: Performance-Based Conditions DLI_TBL_VERIFICATION Increased nominal value of the specific and minimal excise for all tobacco products under tariff position 240220 (PBC/DLI PBC 1 1) This indicator will measure the increase of nominal value of the specific and minimal excise rates for all tobacco products Description under tariff position 240220 for the year 2021 by at least 15 percent compared to the excise rates from 2020. This is aimed to reduce the consumption of tobacco products and increase the budget revenues The Ministry of Finance of Moldova/ Official Gazette. Data source/ Agency World Bank Verification Entity 1. For DLR1.1, review of evidence that the draft Law has been submitted to and is registered in the Parliament. Procedure 2. For DLR1.2, review of evidence that the Parliament adopted the Law and is published in the official gazette. 3. For DLR 1.3, review of evidence that the mentioned rates came into effect. The World Bank Tax Administration Modernization Project (P127734) DLI_TBL_VERIFICATION PBC 2 Ensured that supplies of goods by insolvent subjects are taxed with VAT on the reverse charge principle (PBC/DLI 2) Description Ensured that supplies of goods by insolvent subjects have been taxed with VAT on the reverse charge principle. The MoF/ Official Gazette Data source/ Agency The World Bank Verification Entity For DLR 2.1, review of evidence that the draft Law has been submitted to and is registered in the Parliament. For DLR 2.2, review of evidence that the Parliament adopted the Law that is published in the official gazette and all Procedure mentioned changes came into effect. DLI_TBL_VERIFICATION PBC 3 PBC: Improved the usability of the STS website Description This indicator measures the improvement of the STS's website functionality and usability. STS Data source/ Agency World Bank Verification Entity For DLR3.1, review reports produced by the STS including accessing the website and testing its new features. For DLR3.2, review reports produced by STC on use of the web-site which should include as minimum: number of visits, Procedure number of feedback received, number of tax declarations submitted. DLI_TBL_VERIFICATION PBC 4 PBC: Strengthened the capacity of the STS staff to deliver taxpayer services DLI 4 has two Disbursement Linked Results (DLRs). The DLR 4.1 has been achieved. The STS approved the developed Manual on Taxpayer Services by its Order # dated January 27, 2020. The disbursement Description against achieved DLR 4.1. amounting 110 000 SDR (USD 149,700.10) has been made on March 26, 2020. STS Data source/ Agency The World Bank Tax Administration Modernization Project (P127734) World Bank Verification Entity For DLR4.1., review evidence of STC adoption of the Manual on Taxpayer Services. Procedure For DLR4.2, review reports produced by the STS on staff being trained on the Manual. DLI_TBL_VERIFICATION PBC 5 PBC: Introduced an Electronic Taxpayer Survey Tool This indicator measures the improvement of taxpayer services through introduction of electronic taxpayer survey tool. Description Obtaining in-depth information on taxpayers` satisfaction degree will help STS to improve and optimize its tax services provided. STS Data source/ Agency World Bank Verification Entity For DLR5.1, review evidence of the STS’s Order on the conduct of a Pilot of the Electronic Taxpayer Survey Tool and STS ‘s Report on the Pilot to document the feedback mechanism piloted, the analysis of the feedback and adjustments made to improve the STS’s business processes. Procedure For DLR5.2, review of evidence of the STS’s Order on the system’s roll-out and the STS’s report on the six-months implementation experience (including an inventory of adjustments made based on the survey results). DLI_TBL_VERIFICATION Maintained employment and business survival in the context of the COVID-19 pandemic, by temporarily providing tax PBC 6 relief (PBC 6) Description Maintained employment and business survival in the context of the COVID-19 pandemic, by temporarily providing tax relief The Ministry of Finance of Moldova Data source/ Agency The World Bank Verification Entity For DLR 6.1. – review of MoF’s report with statistical evidences confirming that at least 75% of beneficiary firms that Procedure received subsidies for the payment of allowances / salaries until August 1, 2020 continued to operate in August 2020 and maintained reported employment on at least 60% level compared to April 2020. The World Bank Tax Administration Modernization Project (P127734) For DLR 6.2. - review of MoF’s report with statistical evidences confirming that at least 75% of beneficiary firms that received subsidies based on expanded VAT refund mechanism up to August 31, 2020 continued to operate in September 2020 and maintain reported employment on at least 60% level compared to April 2020. For DLR 6.3. - review of MoF’s report with statistical evidences confirming that at least 75% of beneficiary firms that received subsidies based on expanded VAT refund mechanism up during September 1-30, 2020 continued to operate in October 2020 and maintain reported employment on at least 60% level compared to April 2020. For DLR 6.4. - review of MoF’s report with statistical evidences confirming that at least 75% of beneficiary firms that received subsidies for the payment of allowances / salaries under the Payroll Subsidies Program continued to operate in October 2020 and maintained reported employment on at least 60% level compared to April 2020. For DLR 6.5. - review of MoF’s report with statistical evidences confirming that at least 75% of beneficiary firms that received subsidies based on expanded VAT refund mechanism from October 1 to November 30, 2020 continued to operate in December 2020 and maintain reported employment on at least 60% level compared to April 2020. PBC Targets will be paid as follows: 1. Pay 100% of PBC price if 100% of target results are achieved for both business continuity and staffing level (i.e., 75% of business continuity + 60% of staffing level) 2. Pay 80% of PBC price if at least 80% of target results are achieved for both business continuity and staffing level (i.e., minimum 60% of business continuity + minimum of 48% of staffing level) 3. Pay 60% of PBC price if at least 60% of target results are achieved for both business continuity and staffing level (i.e., minimum 45% of business continuity + minimum of 36% of staffing levels) DLI_TBL_VERIFICATION Established legal frameworks and transparent mechanisms for implementing the temporary tax relief to businesses to PBC 7 mitigate for the negative fiscal impact of the COVID-19 pandemic (PBC 7) Established legal frameworks and transparent mechanisms for implementing the temporary tax relief to businesses to Description mitigate for the negative fiscal impact of the COVID-19 pandemic The Ministry of Finance of Moldova Data source/ Agency The World Bank Verification Entity For DLR 71. - review of an evidence provided by the MoF that the Regulation on subsidizing enterprises and non-commercial organizations, residents of the Republic of Moldova, which have established technical and / or stationary unemployment Procedure due to the epidemiological situation (COVID-19) is approved, published and include measures of eligibility verification and grievance mechanisms; The World Bank Tax Administration Modernization Project (P127734) For DLR 7.2. - review of an evidence provided by the MoF that the Regulation on implementation of subsidies based on expanded VAT Refund mechanism is approved and includes measures of eligibility verification and grievances mechanisms; For DLR 7.3. - review of the MoF report with evidences confirming the implementation of i) a public awareness campaign about Payroll Subsidies and VAT refund programs and ii) support to taxpayers. The evidences should include links to the websites of the MoF/STS, other web sources and/or official magazines /newspapers with publication of rules and procedures, established call lines, etc. For DLR 7.4. - review of completion report produced and made public by the MoF on the implementation of Payroll Subsidies Program; Reports shall include, inter alia, summary information used for determining the subsidy, and total number of applicants and actual beneficiaries, size and type of enterprise, number of employees, number of complaints received, and actions taken based on the established mechanism of grievances. For DLR 7.5. - review of an interim report produced by MoF/STS on implementation of VAT Refund Program. The report shall include, inter alia, summary information used for determining the subsidy, and total number of applicants and actual beneficiaries, size and type of enterprise, number of employees, number of complaints received, and actions taken based on the established mechanism of grievances. For DLR 7.6. - review of completion report produced and made public by the MoF on the implementation of VAT Refund program from its start until December 2020. The report shall include, inter alia, summary information used for determining the subsidy, and total number of applicants and actual beneficiaries, size and type of enterprise, number of employees, number of complaints received, and actions taken based on the established mechanism of grievances. The World Bank Tax Administration Modernization Project (P127734)