The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) Tax Administration Modernization Project (P111942) EUROPE AND CENTRAL ASIA | Armenia | Governance Global Practice | IBRD/IDA | Investment Project Financing | FY 2013 | Seq No: 12 | ARCHIVED on 17-Oct-2018 | ISR34191 | Implementing Agencies: Government of Armenia, State Revenue Commitee Key Dates Key Project Dates Bank Approval Date: 03-Jul-2012 Effectiveness Date: 28-Dec-2012 Planned Mid Term Review Date: 18-Feb-2015 Actual Mid-Term Review Date: 18-Feb-2015 Original Closing Date: 30-Apr-2016 Revised Closing Date: 31-Jan-2019 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) The Project development objective (PDO) is to modernize Armenia’s tax administration to (i) increase voluntary tax compliance, (ii)reduce tax evasion, (iii) reduce compliance costs; and (iv) increase administrative efficiency. This objective will be achieved by: • introducing modern, integrated information technology to support SRC operations; • improving data exchange between the SRC and other agencies to enhance better risk management and targeting of compliance activities (“third party information”); • reengineeringand automation of business processes to improve efficiency and effectiveness; and • expanding eGovernment, including e-filing and e-payments to lower the compliance burden for the private sector. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Institutional Development:(Cost $2.20 M) Process Modernization and Compliance Management:(Cost $1.00 M) Infrastructure and System Modernization:(Cost $11.00 M) Project Management:(Cost $0.90 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Satisfactory Overall Risk Rating Moderate Moderate Implementation Status and Key Decisions The Tax Administration Modernization Project (TAMP) became effective on January 04, 2013 after parliamentary ratification of the financing agreement. The original project implementation period remained relatively short, with a closing date of April 30, 2016 (nearly 3.5 years to complete), compared to most other World Bank supported tax projects. Recognizing this constraint, in October 2015, the Government requested for an 10/17/2018 Page 1 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) extension and on November 4, 2015, Bank Management approved the request to extend the project closing date till December 31, 2017. Since then the project closing date was extended three times – April 2018, September 2018 and January 2019 to enable completion of critical elements. The project was initially implemented in partnership with the USAID till December 2015 which was established under a Memorandum of Understanding (MoU) between the World Bank and the USAID on July 13, 2012. The Tax Reform Project (TRP) of USAID, through which the partnership between USAID and the WB was established to support the State Revenue Committee (SRC), closed on December 31, 2016. At present, the implementation progress remains satisfactory and the project closing date has been extended till January 31, 2019 at the request of the client in order to complete the few remaining assignments including Tax Audit Case Management System. The most recent implementation support mission took place in August 2018 and the next implementation support mission is tentatively scheduled to take place (and to be confirmed) in November/December 2018. All PDO indicators are on track and most of them have already achieved (and exceeded) the targets. 10/17/2018 Page 2 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance -- Moderate Moderate Macroeconomic -- Substantial Substantial Sector Strategies and Policies -- Moderate Moderate Technical Design of Project or Program -- Moderate Moderate Institutional Capacity for Implementation and Sustainability -- Moderate Moderate Fiduciary -- Low Low Environment and Social -- Low Low Stakeholders -- Low Low Other -- -- -- Overall -- Moderate Moderate Results PDO Indicators by Objectives / Outcomes 10/17/2018 Page 3 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) (i) increase voluntary tax compliance IN00585452 ►Number of active VAT taxpayers (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 11,800.00 13,379.00 13,379.00 12,300.00 Date 01-Jan-2011 15-Mar-2018 03-Sep-2018 31-Jan-2019 IN00585455 ►Perception of taxpayers regarding level of professionalism and honesty in tax administration as measured by biannualsurveys (differentiated by gender) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 23.70 23.70 0.00 Date 13-Feb-2012 15-Mar-2018 03-Sep-2018 31-Jan-2019 The initial estimate was don by USAID at the start of the project and USAID ran out funds to do a follow up. Currently SRC is conducting a perception survey through TAMP. SRC has agreed to conduct similar Comments: periodic assessments after the project ends. IN00585453 ►Number of active CIT taxpayers (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 28,939.00 15,877.00 14,444.00 30,400.00 Date 01-Jan-2012 15-Mar-2018 03-Sep-2018 31-Jan-2019 Data to update this indicator will be available after April, 2018. For 2012, from 28791 active CIT taxpayers, 18427 taxpayers were Simplified CIT report filers. Since the Law of the Republic of Armenia on Turnover Tax came into effect from 1 January 2013, the majority of Comments: Simplified CIT payers became Turnover Taxpayers, which leads to the decrease of the figure from year 2013 onward. (ii) reduce tax evasion IN00585466 ►Average Adjustment result from audits (Amount(USD), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 10.10 13.70 13.70 12.10 Date 26-Apr-2016 15-Mar-2018 03-Sep-2018 31-Jan-2019 The figure is reduced due to improvement in tax compliance in Armenia. Comments: (iii) reduce compliance costs IN00585454 ►CIT productivity (Percentage, Custom) 10/17/2018 Page 4 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) Baseline Actual (Previous) Actual (Current) End Target Value 0.10 0.13 0.13 0.14 Date 13-Feb-2012 15-Mar-2018 03-Sep-2018 31-Jan-2019 Data for 2017 to update this indicator will be available only after April 2018. Comments: (iv) increase administrative efficiency IN00585451 ►Ratio of Revenue collected to SRC operating costs (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 74.00 101.80 101.80 82.00 Date 13-Feb-2012 15-Mar-2018 03-Sep-2018 31-Jan-2019 SRC was restructured in 2017 and during this process 500 employees were laid off who received 323 million AMD as severance pay. This was a major reason for this one-time increase in operating cost of Comments: the SRC. Intermediate Results Indicators by Components Institutional Development IN00585456 ►Number of tax inspectors trained (differentiated by gender). (Days, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 34,132.00 34,132.00 13,800.00 Date 13-Feb-2012 15-Mar-2018 03-Sep-2018 31-Jan-2019 IN00585457 ►Number of tax inspectorates (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 39.00 2.00 2.00 29.00 Date 13-Feb-2012 15-Mar-2018 03-Sep-2018 31-Jan-2019 As a result of recent SRC restructuring in 2017, currently there are only 2 tax inspectorates (centralized) - one is for large and medium taxpayers and the other one is for small taxpayers with its regional offices in Comments: the RoA Marzes (regions). This is an organizational improvement leading to significant efficiency gains. IN00585459 ►Provision and Installation of Equipment and Furniture for Training Institute (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Outdated equipment and SRC/FFPMC have Almost completed and New equipment and Value furniture deployed in received 3 bids which network install will be furniture deployed. training institute were substantially higher 10/17/2018 Page 5 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) than the proposed completed before the estimate. FFPMC has project closing date. requested WB’s no objection to rejecting all bids. WB team requested further information before granting the no objection. Procurement method agreed is ITQ (Invitation to Quotation – shopping method). WB provided no objection on March 16, 2018, upon receiving the requested information from the Project Manager. This activity will be completed before September 30, 2018. Date 13-Feb-2012 15-Mar-2018 03-Sep-2018 31-Jan-2019 Contract awarded and network installation will be completed before the end of the project. Comments: IN00585458 ►SRC adopted modernized organizational structure, based on workflow analysis (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target SRC, which was merged with MoF, was separated again in March 2016 and a new SRC, which was merged Chairman was with MoF, was separated appointed. Currently again in March 2016 and besides Business to a new Chairman was Government (B2G) appointed. Currently and G2B, SRC is besides Business to providing B2B and Government (B2G) and B2C (customers) Current SRC structure is G2B, SRC is providing services electronically. based territorial B2B and B2C Most of the services Segmented, functional Value structure, based on face- (customers) services are provided organization adopted. face interactions with electronically. Most of the electronically (96.5%). clients services are provided SRC Senior electronically (96.5%). Management, SRC Senior including the Management, including Chairman, was the Chairman, was changed in October changed again in 2016 and also again in October 2016. April 2018 following the transition to a new parliamentary system of government (i.e. government change). Date 13-Feb-2012 15-Mar-2018 03-Sep-2018 31-Jan-2019 Process Modernization and Compliance Management IN00585460 ►Service centers established (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target 10/17/2018 Page 6 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) Value No Yes Yes Yes Date 13-Feb-2012 15-Mar-2018 03-Sep-2018 31-Jan-2019 Already achieved the target. Comments: IN00585461 ►Percentage of total tax returns filed electronically (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 20.00 96.61 96.61 60.00 Date 13-Feb-2012 15-Mar-2018 03-Sep-2018 31-Jan-2019 IN00585462 ►Time to prepare and pay taxes (Hours, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 500.00 313.00 313.00 400.00 Date 13-Feb-2012 15-Mar-2018 03-Sep-2018 31-Jan-2019 Already achieved the target. Comments: Infrastructure and System Modernization IN00585465 ►Disaster Recovery Center Operational (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No Yes Yes Yes Date 13-Feb-2012 15-Mar-2018 03-Sep-2018 31-Jan-2019 Target achieved. Comments: IN00585463 ►Modern Core IT System Established and Operational (monitored by sub-indicators:(a):Data Processing Center Operational(b):Data Warehouse Operational(c): HRMIS Operational(d): IT Security and Access Man (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 3.00 3.00 4.00 Date 13-Feb-2012 15-Mar-2018 03-Sep-2018 31-Jan-2019 All are complete except HRMIS. However, as indicated in the Aide Memoire of November 2017 mission (under “Key Issues”), funds allocated to HRMIS implementation were reallocated to further strengthen core SRC functions such as Tax Audit Case Management System, Network Infrastructure of SRC, etc. November 2017 Aide memoire included the following on HRMIS: HRMIS. Government of Armenia has decided to launch a government-wide, comprehensive Human Comments: Resource Management Information System (HRMIS) platform supported by the Presidential Order NK263A. Hence, the HRMIS, developed with USAID support under TAMP, becomes redundant. The TTLs met with the Deputy Prime Minister - who leads this new initiative - to receive further information/guidance on this reform initiative. The Deputy PM concurred with the SRC request to reallocate the resources elsewhere to further strengthen some of the core functions of the SRC (for example, tax audit came management system, network infrastructure of SRC). Bank team agrees with 10/17/2018 Page 7 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) the request to cancel HRMIS and support the reallocation of funds to critical tax functions which will further enhance its IT/administrative capacities. IN00585464 ►Network Capacity and IP Telephony operational (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No Yes Yes Yes Date 13-Feb-2012 15-Mar-2018 03-Sep-2018 31-Jan-2019 Target achieved. Comments: Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P111942 IDA-51140 Effective USD 12.00 12.00 0.00 10.47 0.64 94% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P111942 IDA-51140 Effective 03-Jul-2012 09-Jul-2012 28-Dec-2012 30-Apr-2016 31-Jan-2019 Cumulative Disbursements 10/17/2018 Page 8 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) Restructuring History Level 2 Approved on 10-Mar-2014 ,Level 2 Approved on 04-Nov-2015 ,Level 2 Approved on 23-Mar-2018 ,Level 2 Approved on 17-Sep-2018 Related Project(s) There are no related projects. 10/17/2018 Page 9 of 9