Public Disclosure Copy 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 | Specific Investment Loan | FY 2013 | Seq No: 7 | ARCHIVED on 23-May-2016 | ISR23486 | Implementing Agencies: 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-Dec-2017 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 PHRPDODEL Components 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 5/23/2016 Page 1 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) Overall Implementation Progress (IP)  Moderately Satisfactory  Moderately 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 - nearly 3.5 years - compared to most other World Bank supported tax projects with a closing date of April 30, 2016. On October 14, 2015 the Ministry of Finance of the Republic of Armenia sent a letter of request with a detailed justification to the World Bank to extend the project closing date till December 31, 2017. The Bank team prepared a Level 2 Restructuring package for the World Bank (WB) Management’s review and approval. On November 4, 2015, Bank Management approved the request to extend the project closing date till December 31, 2017. Prior to October, 2015 Implementation Support Mission, the Bank team completed a Mid-Term Review (MTR) mission on February 12-20, 2015. The project was 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. At present, the implementation progress remains moderately satisfactory. The most recent implementation support mission took place from April 25-May 4, 2016 and the next implementation support mission is tentatively scheduled to take place in September, 2016. 5/23/2016 Page 2 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) 5/23/2016 Page 3 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) 5/23/2016 Page 4 of 12 Public Disclosure Copy Public Disclosure Copy 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 5/23/2016 Page 5 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) Project Development Objective Indicators PHINDPDOTBL  Average Adjustment result from audits (Amount(USD), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 10.10 10.80 15.80 12.10 Date -- 16-Oct-2015 26-Apr-2016 31-Dec-2017 Comments Already the target has been achieved. PHINDPDOTBL  Number of active VAT taxpayers (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 11800.00 10270.00 12496.00 12400.00 Date 01-Jan-2011 16-Oct-2015 26-Apr-2016 31-Dec-2017 Comments The number of active CIT taxpayers was decreased, as 3358 CIT payers (from 15547) have changed their taxation regime and have become Turnover taxpayers and Patent Fee payers starting from 2014. For more details please see footnotes 5, 6 and 8 in Annex 2 of the Aide Memoire of April, 2016 mission. For more details please see footnotes 5, 6 and 8 of Annex 2 of April 2016 Aide Memoire. PHINDPDOTBL  Number of active CIT taxpayers (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 28939.00 13118.00 13648.00 30400.00 Date 01-Jan-2012 16-Oct-2015 26-Apr-2016 29-Dec-2017 Comments The number of active CIT taxpayers was decreased, as 3358 CIT payers (from 15547) have changed their taxation regime and have become Turnover taxpayers and Patent Fee payers starting from 2014. For more details please see footnotes 5, 6 and 8 in Annex 2 of the Aide Memoire of April, 2016 mission. 5/23/2016 Page 6 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) PHINDPDOTBL  CIT productivity (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.10 0.11 0.10 0.14 Date 13-Feb-2012 16-Oct-2015 26-Apr-2016 29-Dec-2017 Comments The CIT productivity is decreased due to two factors: (i) the RA Law on Making Amendments and Supplements to the Law of the RA on Profit Tax has abolished the minimum profit tax payments for companies since January 1, 2014, and as a result, the actual profit tax revenues were reduced from 124,6 billion AMD to 103,6 billion AMD. For comparison purposes, it is worth stating that the minimum CIT inputs by the results of 2012 and 2013 were 17.7 and 16.5 billion AMD, respectively; (ii) the number of CIT payers has decreased due to a move of some CIT payers into the turnover tax regime and a reduction of economic activities. For more information please see Annex 2 of the Aide Memoire of April 2016 million (footnotes 11 and 12). PHINDPDOTBL  Ratio of Revenue collected to SRC operating costs (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 74.00 110.70 104.50 83.00 Date 13-Feb-2012 16-Oct-2015 26-Apr-2016 29-Dec-2017 Comments Target has already been achieved. PHINDPDOTBL  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 16-Oct-2015 26-Apr-2016 29-Dec-2017 Comments The survey was conducted by USAID in 2013 and the indicator “The level of trust towards the tax service” in the survey is considered to be the closest and the most relevant one for this PDO indicator. Another survey will likely to be conducted closer to the project ending in 2017 (depending largely on USAID’s ability to provide funding to cover if not the entire survey at least a significant portion of it). Overall Comments 5/23/2016 Page 7 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) Intermediate Results Indicators PHINDIRITBL  Number of tax inspectors trained (differentiated by gender). (Days, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 29648.00 34941.00 13800.00 Date 13-Feb-2012 16-Oct-2015 26-Apr-2016 29-Dec-2017 Comments Significant improvement from the previous year. Total includes 12,439 females and 22, 502 male. PHINDIRITBL  Number of tax inspectorates (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 39.00 22.00 22.00 29.00 Date 13-Feb-2012 16-Oct-2015 26-Apr-2016 29-Dec-2017 Comments The target has already been achieved. PHINDIRITBL  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. Currently besides Business to Current SRC structure is Segmented, Government (B2G) and based territorial structure, SRC is merged with functional Value G2B, SRC is providing based on face-face Ministry of Finance organization B2B and B2C interactions with clients adopted. (customers) services electronically. Most of the services are provided electronically (96.5%) Date 13-Feb-2012 16-Oct-2015 26-Apr-2016 29-Dec-2017 5/23/2016 Page 8 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) PHINDIRITBL  Provision and Installation of Equipment and Furniture for Training Institute (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Training Center in Dijijan is almost ready and will Training Center in be open soon (date not Dijijan is still under yet officially known). Outdated equipment and New equipment construction is Technical specification Value furniture deployed in and furniture scheduled to be for Procurement Plan training institute deployed operational by April 1.10 (related to training 2016. centers) will be ready to be sent for World Bank review by May 31, 2016. Date 13-Feb-2012 16-Oct-2015 26-Apr-2016 30-Apr-2016 PHINDIRITBL  Service centers established (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value N Y Y Y Date 13-Feb-2012 16-Oct-2015 26-Apr-2016 29-Dec-2017 PHINDIRITBL  Percentage of total tax returns filed electronically (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 20.00 90.50 96.50 60.00 Date 13-Feb-2012 16-Oct-2015 26-Apr-2016 29-Dec-2017 Comments Target has already been achieved. 5/23/2016 Page 9 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) PHINDIRITBL  Time to prepare and pay taxes (Hours, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 500.00 321.00 313.00 400.00 Date 13-Feb-2012 16-Oct-2015 26-Apr-2016 29-Dec-2017 Comments Target has already been achieved. PHINDIRITBL  Disaster Recovery Center Operational (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value N N Y Y Date 13-Feb-2012 16-Oct-2015 26-Apr-2016 29-Dec-2017 PHINDIRITBL  Modern Core IT System Established and Operational (monitored by sub-indicators:(a):Data Processing Center Operational(b):Data Warehouse Operational(c): IRMIS Operational(d): IT Security and Access Man (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 1.00 1.00 4.00 Date 13-Feb-2012 16-Oct-2015 26-Apr-2016 29-Dec-2017 Comments HRMIS (PP line 1.6) and Data Warehouse (PP line 1.5) are two large packages currently being prepared. 5/23/2016 Page 10 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P111942) PHINDIRITBL  Network Capacity and IP Telephony operational (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value N N N Y Date 13-Feb-2012 16-Oct-2015 26-Apr-2016 29-Dec-2017 Comments IP Telephony is completed already. Cabaling (PP line 1.32) will be complted by the end of 2016. Overall Comments Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P111942 IDA-51140 Effective XDR 7.80 7.80 0.00 4.47 3.33 57% 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-Dec-2017 Cumulative Disbursements 5/23/2016 Page 11 of 12 Public Disclosure Copy Public Disclosure Copy 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 Related Project(s) There are no related projects. 5/23/2016 Page 12 of 12 Public Disclosure Copy