The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) Revenue Administration Reform Project (P149743) EUROPE AND CENTRAL ASIA | Montenegro | Governance Global Practice | IBRD/IDA | Investment Project Financing | FY 2018 | Seq No: 9 | ARCHIVED on 28-Jun-2022 | ISR51909 | Implementing Agencies: Montenegro, Montenegro Tax Administration Key Dates Key Project Dates Bank Approval Date: 31-Jul-2017 Effectiveness Date: 13-Mar-2018 Planned Mid Term Review Date: 29-Sep-2021 Actual Mid-Term Review Date: 27-Sep-2021 Original Closing Date: 31-Mar-2023 Revised Closing Date: 31-Mar-2023 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) The development objective of the project is to improve the effectiveness of operational functions of Montenegro’s tax administration and to reduce the compliance costs for corporate taxpayers. The project supports Montenegro’s long-term vision of a revenue administration that operates with streamlined risk-based business processes that contribute to the efficient collection of taxes and social contributions from all sources of economic activity. Increased compliance will generate a more robust revenue stream to provide essential services to citizens. Improvements in revenue administration capacity will also support the country's goal for EU accession and economic integration with EU member states. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Electronic Fiscal Invoicing:(Cost $5.30 M) Institutional Development:(Cost $1.35 M) Business Processes:(Cost $13.85 M) Taxpayer Services:(Cost $0.23 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Unsatisfactory Unsatisfactory Overall Implementation Progress (IP) Unsatisfactory Unsatisfactory Overall Risk Rating Substantial Substantial Implementation Status and Key Decisions Project progress has been stalled due to a leadership vacuum. A new Government is now in place with a new Director for the MRCA having been appointed and is taking decisive action to move the Project forward. The contract for the Datawarehouse/ Business Intelligence consultancy was signed in May 2022, and it’s implementation is underway. The bid document for the Integrated Revenue Management System (IRMS) procurement 6/28/2022 Page 1 of 8 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) is also being finalized. However, due to delays in the procurement of the IRMS, the Project will not be able to complete activities nor fully achieve its Project Development Objective by its closing date of March 31, 2023. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance Moderate Substantial Substantial Macroeconomic Substantial Moderate Moderate Sector Strategies and Policies Moderate Moderate Moderate Technical Design of Project or Program Substantial Moderate Moderate Institutional Capacity for Implementation and Substantial Substantial Substantial Sustainability Fiduciary Moderate Moderate Moderate Environment and Social Low Low Low Stakeholders Moderate Moderate Moderate Other -- Moderate Moderate Overall Substantial Substantial Substantial Results PDO Indicators by Objectives / Outcomes Improve effectiveness of operational functions of MTA IN01155058 ►Tax Gap for VAT (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Analysis was done using 6% reduction in Tax No methodology for Tax data from 2017-2019. Tax gap is 26.37% (for Value Gap for VAT compared Gap for VAT estimation Data awaiting approval 2020) – not achieved. to 2020 value for publication. Date 01-Apr-2016 06-Dec-2021 23-Jun-2022 31-Dec-2022 VAT Gap Methodology was approved by MTA and baseline value set. Values need to be published and results used in risk analytics/compliance improvement programs. Moreover, a repeat analysis for Comments: succeeding years should be conducted. IN01155060 6/28/2022 Page 2 of 8 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) ►Percentage of tax returns filed on time (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target VAT: 86.41% VAT: 87.49% CIT: 79.79% CIT: 83.32% Reduction in CIT is Value VAT: 82; CIT: 89 Reduction in CIT is due VAT: 92; CIT: 96 due to COVID-19. to COVID-19. (Full 2021 data) (January-June 2021) Date 31-Dec-2016 06-Dec-2021 23-Jun-2022 31-Dec-2022 No significant project activities yet to impact value of indicator. For VAT, the EFI should be contributing to Comments: improvements. IN01155076 ►Achieved processing of almost 90% of VAT refund claims within 30 days for predominantly exporters and 60 days for the rest of the taxpayers according to domestic law (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Exporters: 44.44% Exporters: 68.42% Rest: 52.13% Rest: 60.49% Exporters: 70%; Rest: (Data for full 2021, Exporters: 88%; Rest: Value (January-June 2021) 65% indicates deterioration) 85% Date 31-Dec-2018 06-Dec-2021 23-Jun-2022 31-Dec-2022 EFI expected to contribute to improvements in this indicator. Negative trend needs to be further Comments: analyzed. Reduce compliance costs for corporate taxpayers IN01155059 ►Time it takes to pay taxes and social contributions (Hours, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 314.00 300.00 300.00 200.00 Date 31-Dec-2015 06-Dec-2021 23-Jun-2022 31-Dec-2022 Data is from the Doing Business report of 2020. The indicator will be replaced due to the discontinuation Comments: of the Doing Business. This will be processed through a restructuring expected in the fall of CY2022. Intermediate Results Indicators by Components Institutional Development IN01155077 ►RCAM staff satisfaction with the new skills and ability to apply them, disaggregated by gender (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 6/28/2022 Page 3 of 8 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) No change from previous - based on baseline survey in 2019 - 68% of MTA staff respondents indicate satisfaction (men 71%, women 66%). 2020 Conducted (2022). Increase by 10% survey was not Index of RCAM staff Value No baseline compared to baseline conducted due to satisfaction: 60. (men: established in 2019 COVID-19 and 56, women: 62). institutional changes. The 2021 staff survey will be launched by mid- December 2021. Date 31-Dec-2016 06-Dec-2021 23-Jun-2022 31-Dec-2022 Staff satisfaction levels dropped compared to the 2019 baseline. This could be to the political instability and leadership vacuum that prevailed since 2020. Comments: IN01155081 ►Estimated tax gap is calculated annually and suitable for publication by year 5 (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Yes. Exercises Yes. Exercises conducted using 2017- conducted using 2019 Value No 2019 data. data. Yes (with publication) Date 31-Mar-2016 06-Dec-2021 23-Jun-2022 31-Dec-2022 Results are awaiting approval for publication. Analysis of data for 2020 onwards need to be conducted as Comments: well. Business Processes IN01155078 ►Payment compliance rate for VAT (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 62.00 75.00 75.00 87.00 Date 31-Dec-2016 06-Dec-2021 23-Jun-2022 31-Dec-2022 No updated information was available. Data reported remains that of 2020. Comments: IN01155082 ►Payment compliance rate for CIT (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 81.00 80.00 80.00 93.00 Date 31-Dec-2016 06-Dec-2021 23-Jun-2022 31-Dec-2022 Data available is as of 2020. Same achievement as in 2019. Below target of 86% for 2020 due to COVID- Comments: 19. 6/28/2022 Page 4 of 8 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) IN01155085 ►Improved selection of taxpayers for audit so that comprehensive audits are centrally selected from the risk analysis system (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 75% of comprehensive no comprehensive audit 20% above the target of 75% as of 2021, above audits selected Value centrally selected from 15% for 2020 target of 60% centrally from risk risk analysis system analysis system Date 31-Dec-2018 06-Dec-2021 23-Jun-2022 31-Dec-2022 Project related activities have yet to be implemented although "to-be" elements have been identified under the Project. Achievements are due to IMF Technical Assistance on risk analysis. No audit strategy yet Comments: and no risk management system in place. Taxpayer Services IN01155079 ►Taxpayers satisfaction with MTA's quality of taxpayers services and integrity of MTA staff, disaggregated by gender (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Follow-up taxpayer satisfaction survey was launched on December 6, 2021. That said, the EFI system has been benefiting from continuous feedback from taxpayers. Accordingly, the EFI has become more and more user friendly - to evidence, system updates were released in July 2021 - 1. The 13th version of the fiscal service were released in production on July 14, 76 down from 82 in Increase by 10% Value No baseline 2021. 2019 compared to baseline 2. The 6th version established in 2019 of the self-service portal for fiscal obligors/taxpayers (SEP portal) was released in production on July 8, 2021. All announcements about the EFI are followed by media appearances of authorized officials of the Revenue Administration in written and electronic media (guest appearances in live programs and statements for news programs), as well as continuous 6/28/2022 Page 5 of 8 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) announcements on the accounts of the Revenue Administration on social networks Facebook and Twitter. Date 31-Dec-2016 06-Dec-2021 23-Jun-2022 31-Dec-2022 The survey conducted in 2021/2022 indicates taxpayer satisfaction dropped compared to the 2019 baseline. This needs to be further analyzed as this is not consistent with the mandatory electronic Comments: filing of tax returns, EFI and the continued positive feedback on the call center. IN01155083 ►Increased e-filing for VAT (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 75.00 99.77 99.78 95.00 Date 31-Dec-2018 06-Dec-2021 23-Jun-2022 31-Dec-2022 Critical project activities have yet to be implemented. EFI expected to have a positive contribution to this indicator. Nevertheless, indicator performance is primarily due to a law mandating electronic filing. Accordingly, as of the first 5 months of CY2021, achievement is 99.77% above target of 90% for Comments: 2021 and project end-target of 95%. Electronic Fiscal Invoicing (EFI) IN01155080 ►Improved post filing index (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Indicator to be No change from previous replaced following increased by 8% from Value 70.49 - 70.5 - no follow-up discontinuation of baseline publication issued Doing Business Report Date 31-Dec-2018 06-Dec-2021 23-Jun-2022 31-Dec-2022 The indicator will be replaced due to the discontinuation of the Doing business. Last data available is from Doing Business report of 2020 at 70.5. Comments: IN01155084 ►Real-time information for VAT transactions available to MTA (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Achieved - EFI system Achieved - EFI system EFI system available no real time EFI system available 99.5% of the available 99.5% of the Value 99.5% of the time for in place time for all cash time for all cash all transactions transactions transactions Date 31-Dec-2018 06-Dec-2021 23-Jun-2022 31-Dec-2022 Project end-target achieved with EFI implementation starting in 2021. Comments: 6/28/2022 Page 6 of 8 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) Performance-Based Conditions Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P149743 IBRD-87720 Effective USD 15.70 15.70 0.00 1.69 14.08 11% P149743 IBRD-90130 Effective USD 5.20 5.20 0.00 5.56 0.15 97% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P149743 IBRD-87720 Effective 31-Jul-2017 19-Jan-2018 13-Mar-2018 31-Mar-2023 31-Mar-2023 P149743 IBRD-90130 Effective 10-Oct-2019 11-Nov-2019 20-Nov-2019 31-Mar-2023 31-Mar-2023 Cumulative Disbursements 6/28/2022 Page 7 of 8 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) Restructuring History There has been no restructuring to date. Related Project(s) P170454-Additional Financing for the Montenegro Revenue Administration Reform Project 6/28/2022 Page 8 of 8