The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) Tax Administration Modernization Project (P127734) EUROPE AND CENTRAL ASIA | Moldova | Governance Global Practice | IBRD/IDA | Investment Project Financing | FY 2016 | Seq No: 12 | ARCHIVED on 23-Jun-2022 | ISR51800 | Implementing Agencies: Republic of Moldova, The State Tax Service Key Dates Key Project Dates Bank Approval Date: 06-Jun-2016 Effectiveness Date: 25-Jan-2017 Planned Mid Term Review Date: 30-Jun-2020 Actual Mid-Term Review Date: 09-Jul-2020 Original Closing Date: 31-Dec-2021 Revised Closing Date: 30-Nov-2023 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) To improve revenue collection, tax compliance and taxpayer services in the Republic of Moldova Has the Project Development Objective been changed since Board Approval of the Project Objective? Yes Board Approved Revised Project Development Objective (If project is formally restructured) 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 Components Table Name Institutional development:(Cost $0.65 M) IT Infrastructure and system modernization:(Cost $1.18 M) Project management and change management:(Cost $0.17 M) RBF. Support Tax Policy, Tax Administration Reforms and Operational Development:(Cost $3.00 M) RBF. Maintaining employment and business survival in the context of COVID-19 pandemic:(Cost $15.00 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Satisfactory Satisfactory Overall Risk Rating Moderate Moderate Implementation Status and Key Decisions The Project, which launched in 2017 and was restructured in 2019 and 2020, is progressing well. Most of the activities are completed and almost 94 percent (US$18.79 million) of the Bank financing has been disbursed to date. 6/23/2022 Page 1 of 11 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) Both results-based components are nearing completion with three remaining milestones to be achieved by the end of 2022. The results framework section attests to the achievements made under the seven performance-based conditions of the project. The remaining activities under the Project’s investment part, including i) State Tax Service (STS) Information Technology (IT) Capability Gap Assessment that will inform the new STS IT Strategy, and follow up activities on IT modernization, ii) procurement of gadgets for e-taxpayer survey tool, and iii) a project-funded final taxpayer survey, are at the vendor selection stage and expected to be implemented by the end of 2022. The Project has an outcome indicator (Time required to comply with taxes) based on the Doing Business Report which has been discontinued by the Bank. In line with the Bank’s policy, this indicator will be replaced. This replacement is being processed through a restructuring. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance High Substantial Moderate Macroeconomic High Moderate Moderate Sector Strategies and Policies Substantial Moderate Moderate Technical Design of Project or Program Substantial Moderate Moderate Institutional Capacity for Implementation and Substantial Moderate Moderate Sustainability Fiduciary Substantial Moderate Moderate Environment and Social Low Low Low Stakeholders Moderate Moderate Moderate Other -- Moderate Moderate Overall Substantial Moderate Moderate Results PDO Indicators by Objectives / Outcomes To improve taxpayer services IN01151901 ►Time required to comply with taxes (Hours, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 186.00 183.00 183.00 173.00 Date 31-Dec-2015 23-Dec-2021 22-Jun-2022 30-Nov-2023 6/23/2022 Page 2 of 11 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) The indicator was based on the Doing Business Report which is discontinued. Thus, in line with the Bank’s policy, this indicator will be replaced. This replacement is being processed through a restructuring. Comments: IN01151902 ►PBC: Strengthened the capacity of the STS staff to deliver taxpayer services (Text, Custom, PBC) Baseline Actual (Previous) Actual (Current) End Target The Manual is The Manual is The Manual is There is no a Manual on implemented and all implemented and all implemented and all Taxpayer Services, the eligible staff of STS Value eligible staff of STS eligible staff of STS staff had no specific located in all offices located in all offices was located in all offices trainings. was trained trained was trained Date 31-Dec-2018 23-Dec-2021 22-Jun-2022 31-Dec-2020 The PBC 4 is fully achieved and disbursed. This indicator has two results milestones. The first one 4.1. was achieved in January 2020 - the STS approved the developed Manual on taxpayer Service with its Order # 40 dated January 27,2020. The disbursement against this result 4.1. was SDR 110,000 (US$ 149,700.10). Comments: The second milestone 4.2 was achieved in October 2020- the STS completed the training of its eligible staff located in all offices on Taxpayer Service Manual. The MoF submitted the report with evidences on February 17, 2021. The resulted disbursement was SDR 109,797.70 (US$ 156,290.44). IN01151904 ►PBC: Introduced an Electronic Taxpayer Survey Tool (Text, Custom, PBC) Baseline Actual (Previous) Actual (Current) End Target The tool is No tool for taxpayers’ The e-taxpayer survey The e-taxpayer survey implemented. Value regular feedback is in tool was piloted and put tool is in operational place. into operation use Date 31-Dec-2018 23-Dec-2021 22-Jun-2022 30-Jun-2022 In progress. This PBC is aimed at reflecting the STS`s efforts to improve its taxpayer services under Component 1. PBC 5 has two milestones. PBC 5.1. on piloting of electronic taxpayer survey tool mechanism, staff training and launch of tool's roll- out was achieved in December 2021. The STS trained its 175 tax officials, piloted the e-taxpayer survey Comments: tool during June 21-July 23, 2021, and launched the tool’s roll-out on September 15, 2021. The disbursement against this first milestone was SDR 440,000 (US$ 615,639.20). The full achievement of PBC 5 is expected by the end of 2022 upon receiving STS's report on results of 6-month of e-survey tool implementation (PBC 5.2) and upon utilization of the gadgets to be procured under the IPF part. IN01151905 ►PBC: Improved the usability of the STS website (Text, Custom, PBC) Baseline Actual (Previous) Actual (Current) End Target There are two websites available (one for information only and another one for the submission of tax New STS website is used New STS website is New STS website is Value declarations by by taxpayers used by taxpayers used by taxpayers taxpayers); there are some gaps in the functionality of both websites. 6/23/2022 Page 3 of 11 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) Date 31-Dec-2018 23-Dec-2021 22-Jun-2022 30-Nov-2023 PBC 3 is fully achieved and disbursed. The STS’s new single website has been operational since April 1, 2021. The MoF submitted reports with evidences on achievement of both milestones - 3.1. on the launch Comments: of the new website and 3.2. regarding the use of the website by users on September 30, 2021. These were accepted by the Bank and resulted disbursement was SDR 440,000.00 ($621,082.00). Support business survival and sustain employment in the context of COVID-19 through temporary tax re IN01151903 ►Maintained employment and business survival in the context of the COVID-19 pandemic, by temporarily providing tax relief (PBC 6) (Text, Custom, PBC) Baseline Actual (Previous) Actual (Current) End Target 75% of beneficiary companies that received subsidies No government under the payroll and programs to support expanded VAT refund business continuity and Value Target fully achieved. Target fully achieved. mechanisms continued sustain employment in operation and the context of COVID-19 maintained pandemic employment at 60% level compared to April 2020 Date 01-Apr-2020 23-Dec-2021 22-Jun-2022 01-Feb-2021 PBC 6 is fully achieved and disbursed. The Government has undertaken actions foreseen under PBC 6 results scheduled for 2020 and fully achieved the PBCs targets for business continuity and employment levels. Comments: The Bank approved MoF's reports with evidences on achievement of i) PBCs 6.1-6.4. on January 22, 2021 and ii) of PBC 6.5 on June 11, 2021. The overall disbursement under the PBC 6 is EUR 10.44 mln. (US$ 12.49 mln.). Overall Comments PDO The Borrower is progressing with PDO indicators. STS’s activities aimed at improvement of taxpayer services through improving the usability of the STS website (PBC 3) and strengthening the STS capacities in taxpayer service delivery (PBC 4) have been completed. The activity on introduction of electronic taxpayer survey tool (PBC 5) is under way with completion of activities under the first milestone and ongoing activities on the e-survey tool roll-out started in mid-September 2021. Full completion of indicator-related activities is expected by the end of 2022. The Government’s activities supported to achieve PBC 6 and aimed at supporting business survival and sustainment of the employment in the context of the COVID-19 pandemic through temporary tax relief were completed in June 2021 with 100% achievement of target levels for employment and business continuity. The time required to comply with taxes, that was measured based on Bank’s Doing Business Report data, will be replaced as the result of DB Report discontinuation. Intermediate Results Indicators by Components Institutional development IN01151906 ►Taxpayer satisfaction (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 6/23/2022 Page 4 of 11 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) Satisfaction increase - 10% (compared to baseline) Final survey Baseline survey Next and final survey Legal entities -76,3% and conducted with data conducted. Next and final is under preparation Value Individuals – 69,2%. disaggregated by survey is planned for the and planned for the gender. Results and second half of 2022. second half of 2022. suggested actions of the STS to address weaknesses are published on the STS website. Date 31-Dec-2018 23-Dec-2021 22-Jun-2022 30-Nov-2023 STS’s has started preparation to the final taxpayer satisfaction survey that currently planned to be launched in the second half of 2022. Meanwhile, the STS continues its stakeholder engagement activities aimed at improving the taxpayer’s service delivery. These activities are foreseen by the STS’s strategic documents, as 2021-2023 STS’s Strategic Development Program, 2021-2026 Taxpayer Service Strategy, and 2020-2023 Communication Strategy. Within the first half of 2022 the STS, as a part of its citizen engagement activities contributing to the tax administration reform: i) organized public online consultations for 11 normative acts placed on STS’s website of which 10 has already been adopted; ii) conducted 436 seminars with taxpayers and tax collectors from Local Public Administration Authorities on issues related to legislative changes and fair application of local taxes; iii) held 9 consultation meetings with Accountant News on various topics, Comments: including such as i) improving the electronic services provided; ii) proposals to complete the Generalized Basis of Tax Practice; iii) correct application of tax legislation. In the use of new e-taxpayer survey tool, one of a citizen engagement mechanisms, STS launched two one-month surveys of taxpayers’ satisfaction with STS services related to the process of receiving income tax returns from individuals and legal entities in early May 2022. The results of the surveys will inform follow-up improvements in the process of voluntary tax compliance and reducing the burden on taxpayers. Since the launch of operational use of the e-taxpayer survey tool in mid-September 2021, the STS has completed four surveys on i) integrity of STS employees; ii) use of electronic tax services; iii) functioning of the petition system within the STS, and iv) evaluation of time used by economic agents to submit applications to the STS IN01151910 ►The Training Distance Learning System for the most important workflows developed (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target All (12) identified All identified distance All (12) identified distance learning learning courses to distance learning courses The list of training courses to support the support for the most Value to support the most programs is not identified most important important workflows important workflows were workflows were are developed and developed. developed. updated. Date 31-Dec-2015 23-Dec-2021 22-Jun-2022 30-Nov-2023 Comments: Achieved. The STS developed 12 distance learning programs and put them on the MOODEL platform in 2020. Three out of twelve identified training programs have been developed by STS with support from development partners, including the US Treasury (on Taxpayer Service Manual) and SIDA (under Institutional Cooperation Project (2018-2021). TAMP's earlier support covered the purchasing of 45 video- conferencing equipment items to be used for distance learning of the STS employees across the whole country. The STS is strengthening the sustainability of results achieved under TAMP by developing new courses and continuous staff training. At the beginning of 2022, the STS had 55 distance learning courses uploaded to the MOODEL platform. During the first half of 2022, the STS developed 5 new training courses and updated 2 existing ones, as well as 3 831 of STS's tax officials took different of these online trainings. 6/23/2022 Page 5 of 11 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) IN01151912 ►Number of hits to the STS web-site (Number (Thousand), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 3,570,004.00 7,648,815.00 10,272,997.00 7,150,000.00 Date 31-Dec-2015 23-Dec-2021 22-Jun-2022 30-Nov-2023 The annual target for 2021 (7.05 mln.) was achieved reaching above 10.27 mln. hits and also surpassing the final target. This summary number of hits included accesses to the following STS's websites: www.servicii.fisc.md - 7 600 492, www.sfs.md (old version) - 549 038, and www.sfs.md (new version) – 2 Comments: 123 467. On April 1, 2021, the STS introduced the new single website https://sfs.md/ro. Starting in 2022, the reporting data on the number of hits will be based on figures from the new single website. IT Infrastructure and System Modernization IN01151908 ►Assigned tasks to inspectors are completed and monitored continuously (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 100.00 Date 01-Apr-2020 23-Dec-2021 22-Jun-2022 30-Jun-2021 This indicator will be deleted during the upcoming TAMP restructuring. The STS will drop indicator-related procurement of remote monitoring system solution, among a few others IPF activities, to ensure adequate Comments: resources for the IT Capability Gap Assessment. RBF: Support in tax policy and tax administration reforms IN01151907 ►Decrease in tax arrears (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 8.50 4.55 5.08 6.48 Date 02-Jan-2017 23-Dec-2021 22-Jun-2022 30-Nov-2023 The annual target for 2021 (6.48) was achieved as tax arrears decreased to 5.08 percent compared to planned 6.48 percent. Actual 2021 level already surpassed the final target. This was caused by the fact that the amount of tax arrears at the end of 2021 (2,403.7 mln.lei) was lower compared to revenues collected during 2021 Comments: (47,285.4 mln.lei). Better performance of the indicator in 2020 (4.55 percent) would require further analysis that STS will share with the Bank in the next reporting period. IN01151911 6/23/2022 Page 6 of 11 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) ►Increased nominal value of the specific and minimal excise for all tobacco products under tariff position 240220 (PBC/DLI 1) (Text, Custom, PBC) Baseline Actual (Previous) Actual (Current) End Target Specific rates and minimum rates by types Specific rates came into Specific rates came Specific rates came Value of tobacco products as effect. into effect. into effect set up in the Tax Code of Moldova in 2017 Date 31-Dec-2018 23-Dec-2021 22-Jun-2022 31-Dec-2021 This indicator was fully achieved and funds in amount of SDR 511,625.37 or equivalent of US$ 731,762.71 were disbursed. The indicator includes 3 milestones. As of December 31, 2020 two results were completed, as the MoF submitted to the Parliament the draft Law on Changes to the Tax Code on November 30,2020 (1.1) and this was approved by the Parliament on December 18, 2020 (1.2). The Comments: Changes to the Tax Code came info effect from January 1, 2021 (1.3). The MoF's submitted evidence for PBC 1.1 and 1.2 on December 30, 2020; for PBC 1.3 - on February 2021. The Bank accepted these and relevant funds were disbursed. IN01151913 ►Ensured that supplies of goods by insolvent subjects are taxed with VAT on the reverse charge principle (PBC/DLI 2) (Text, Custom, PBC) Baseline Actual (Previous) Actual (Current) End Target Due to the legal gap in provisions which stipulates the process of debt cancellation, at the The adopted changes to The adopted changes The adopted changes Value time transfer of collected the Tax Code came into to the Tax Code came to the Tax Code came VAT insolvent subject effect into effect into effect does not have liquidity and this creates budget losses. Date 31-Dec-2018 23-Dec-2021 22-Jun-2022 31-Mar-2020 This indicator was fully achieved in January 2020 and funds in the amount of SDR 476,700 or Comments: equivalent of USD 648,745.80 were disbursed on March 26, 2020. Support Maintaining Employment and Business Survival in the Context of COVID-19 Pandemic IN01151909 ►Established legal frameworks and transparent mechanisms for implementing the temporary tax relief to businesses to mitigate for the negative fiscal impact of the COVID-19 pandemic (PBC 7) (Text, Custom, PBC) Baseline Actual (Previous) Actual (Current) End Target Legal frameworks Legal frameworks for Legal frameworks are Legal frameworks have have been mechanisms to sustain established and been established. Report established. Report on tax revenue collection reports on on payroll subsidies payroll subsidies Value through support to implementation of program is made public. program is made business continuity that Payroll Subsidies and Reports on VAT refund public. Reports on ensured transparency VAT refund programs program awaited. VAT refund program are not available are available awaited. Date 01-Apr-2020 23-Dec-2021 22-Jun-2022 01-Feb-2021 On track. This PBC 7 has six milestones. Three milestones on approved legislation were completed and disbursed (US$ 1.36 mln.) in February 2021. The fourth milestone regarding publication of completion Comments: report on payroll subsidies program (7.4) was also achieved and disbursed in December 2021. The MoF published the completion report on its website in both Romanian (https://mf.gov.md/ro/content/rapoarte-1/) and English (https://mf.gov.md/en/content/reports-1) and submitted evidence on PBC 7.4 achievement on 6/23/2022 Page 7 of 11 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) December 10, 2021. The Bank accepted these and funds in equivalent of US$ 0.716 mln. were disbursed on December 21, 2021. For two remaining milestones (PBC 7.5-7.6), the MoF is in process of finalizing reports on VAT refund program implementation following Bank project team's prior reviews (last comments were provided on May 1, 2022). The publication of finalized reports and follow-up final disbursement of US$1 mln. are expected by July 2022. Overall Comments IR All intermediate results indicators are in line with their annual targets. Three non-PBC indicators (Training distance learning system, Decrease in tax arrears, and Number of hits to the STS website) have already achieved their final targets. The results achieved under indicator on training distance learning system are improved. Two PBC related indicators (PBC 1 and PBC 2) have been fully completed. PBC 7 is near completion, with four milestones achieved and disbursed. The remaining actions require MoF's finalization and publication of reports on the results of implementation of Government’s VAT refund program (PBCs 7.5-7.6). Publication of finalized reports are expected by mid-June 2022 with full completion and disbursement in July 2022. Performance-Based Conditions IN01151914 ►PBC 1 Increased nominal value of the specific and minimal excise for all tobacco products under tariff position 240220 (PBC/DLI 1) (Text, Outcome, 700,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) February 2021 Specific rates and minimum rates by types of tobacco Specific rates came into Specific rates came into Value products as set up in the -- effect. effect. Tax Code of Moldova in 2017 Date -- 23-Dec-2021 22-Jun-2022 -- IN01151915 ►PBC 2 Ensured that supplies of goods by insolvent subjects are taxed with VAT on the reverse charge principle (PBC/DLI 2) (Text, Outcome, 650,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) February 2021 Due to the legal gap in provisions which stipulates the process of debt The adopted changes to The adopted changes to cancellation, at the time Value the Tax Code came into the Tax Code came into -- transfer of collected VAT effect effect insolvent subject does not have liquidity and this creates budget losses. Date -- 23-Dec-2021 22-Jun-2022 -- IN01151916 6/23/2022 Page 8 of 11 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) ►PBC 3 PBC: Improved the usability of the STS website (Text, Output, 600,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) February 2021 There are two websites available (one for information only and another one for the New STS website is used New STS website is used Value submission of tax -- by taxpayers by taxpayers declarations by taxpayers); there are some gaps in the functionality of both websites. Date -- 23-Dec-2021 22-Jun-2022 -- IN01151917 ►PBC 4 PBC: Strengthened the capacity of the STS staff to deliver taxpayer services (Text, Output, 300,000.00, 0%) Baseline Actual (Previous) Actual (Current) February 2021 The Manual is The Manual is There is no a Manual on implemented and all implemented and all Taxpayer Services, the Value eligible staff of STS eligible staff of STS -- staff had no specific located in all offices was located in all offices was trainings. trained trained Date -- 23-Dec-2021 22-Jun-2022 -- IN01151918 ►PBC 5 PBC: Introduced an Electronic Taxpayer Survey Tool (Text, Output, 750,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) February 2021 Developed and pilot No tool for taxpayers’ completed. Full roll-out The e-taxpayer survey Value regular feedback is in -- authorized in September tool is in operational use place. 2021. Date -- 23-Dec-2021 22-Jun-2022 -- IN01151919 ►PBC 6 Maintained employment and business survival in the context of the COVID-19 pandemic, by temporarily providing tax relief (PBC 6) (Text, Output, 12,000,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) February 2021 No government programs to support business Value continuity and sustain Target fully achieved. Target fully achieved. -- employment in the context of COVID-19 pandemic 6/23/2022 Page 9 of 11 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) Date -- 23-Dec-2021 22-Jun-2022 -- IN01151920 ►PBC 7 Established legal frameworks and transparent mechanisms for implementing the temporary tax relief to businesses to mitigate for the negative fiscal impact of the COVID-19 pandemic (PBC 7) (Text, Outcome, 3,000,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) February 2021 Legal frameworks Legal frameworks for established. Public Legal frameworks have mechanisms to sustain tax awareness campaign been established. Report revenue collection through deployed. Report on on payroll subsidies Value support to business -- completion of payroll program is made public. continuity that ensured subsidy program Reports on VAT refund transparency are not published on the STS program awaited. available website. Date -- 23-Dec-2021 22-Jun-2022 -- Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P127734 IBRD-86250 Effective USD 12.58 12.58 0.00 12.53 0.00 100% P127734 IDA-58290 Effective USD 7.42 7.42 0.00 6.26 1.13 85% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P127734 IBRD-86250 Effective 06-Jun-2016 28-Jun-2016 25-Jan-2017 31-Dec-2021 30-Nov-2023 P127734 IDA-58290 Effective 06-Jun-2016 28-Jun-2016 25-Jan-2017 31-Dec-2021 30-Nov-2023 Cumulative Disbursements 6/23/2022 Page 10 of 11 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) Restructuring History Level 2 Approved on 05-Jun-2019 ,Level 2 Approved on 14-Sep-2020 ,Level Approved on 28-Dec-2020 Related Project(s) There are no related projects. 6/23/2022 Page 11 of 11