FOR OFFICIAL USE ONLY Report No: ICR00005679 INTERNATIONAL DEVELOPMENT ASSOCIATION IMPLEMENTATION COMPLETION AND RESULTS REPORT CREDIT No. 54260 ON A CREDIT IN THE AMOUNT OF SDR 38.8 MILLION (US$60 MILLION EQUIVALENT) TO THE PEOPLE’S REPUBLIC OF BANGLADESH FOR THE REVENUE MOBILIZATION PROGRAM FOR RESULTS: VAT IMPROVEMENT PROGRAM (VIP) December 21, 2021 Governance Global Practice South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Exchange Rate Effective November 30, 2021 Currency Unit = SDR SDR 0.713877 = US$1 US$1.400800 = SDR 1 FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS COVID-19 Coronavirus Disease 2019 DLI Disbursement-Linked Indicator DLR Disbursement-Linked Result EEP Eligible Expenditure Program ERD Economic Relations Division FAPAD Foreign Aided Program Audit Directorate GDP Gross Domestic Product GOB Government of Bangladesh ICR Implementation Completion and Results Report IMED Implementation Monitoring and Evaluation Division IPF Investment Project Financing IR Intermediate Result IRD Internal Resources Division ISR Implementation Status and Results Report IT Information Technology IVAS Integrated VAT Administration System M&E Monitoring and Evaluation MTR Midterm Review NBR National Board of Revenue PD Program Director PDO Program Development Objective PforR Program-for-Results PIU Program Implementation Unit RTI Right to Information SAP-CC Systems Applications and Products in Data Processing - Competencies Center SD Supplementary Duty SPEMP-BETF Strengthening Public Expenditure Management Program - Bank Executed Trust Fund TTL Task Team Leader VAT Value Added Tax VIP VAT Improvement Program Regional Vice President: Hartwig Schafer Country Director: Mercy Miyang Tembon Regional Director: Zoubida Kherous Allaoua Practice Manager: Hoon Sahib Soh Task Team Leader(s): Winston Percy Onipede Cole, Syed Khaled Ahsan ICR Main Contributor: Andrew Osei Asibey TABLE OF CONTENTS DATA SHEET .......................................................................................................................... 5 I. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES .................................................... 9 A. CONTEXT AT APPRAISAL AND THEORY OF CHANGE .................................................................9 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION .............................................................. 12 II. OUTCOME .................................................................................................................... 13 A. RELEVANCE .......................................................................................................................... 13 B. ACHIEVEMENT OF PDOs (EFFICACY) ...................................................................................... 13 C. JUSTIFICATION OF OVERALL OUTCOME RATING .................................................................... 16 D. OTHER OUTCOMES AND IMPACTS (IF ANY) ........................................................................... 16 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 17 A. KEY FACTORS DURING PREPARATION ................................................................................... 17 B. KEY FACTORS DURING IMPLEMENTATION ............................................................................. 17 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 18 A. QUALITY OF MONITORING AND EVALUATION ....................................................................... 18 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ..................................................... 19 C. BANK PERFORMANCE ........................................................................................................... 19 D. RISK TO DEVELOPMENT OUTCOME ....................................................................................... 20 V. LESSONS AND RECOMMENDATIONS ............................................................................. 20 ANNEX 1. RESULTS FRAMEWORK, DISBURSEMENT LINKED INDICATORS, AND PROGRAM ACTION PLAN ...................................................................................................................... 22 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 37 ANNEX 3. PROGRAM EXPENDITURE SUMMARY ................................................................... 39 ANNEX 4. BORROWER’S COMMENTS ................................................................................... 40 ANNEX 5. SUPPORTING DOCUMENTS .................................................................................. 41 ANNEX 6. SUMMARY OF MODULE WISE STATUS OF OPERATIONAL ACCEPTANCE OF IVAS .... 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) DATA SHEET BASIC INFORMATION Product Information Program ID Program Name Financing Instrument Revenue Mobilization Program for P129770 Results: VAT Improvement Program Program-for-Results Financing (VIP) Country IPF Component Bangladesh No Organizations Borrower Implementing Agency People's Republic of Bangladesh National Board of Revenue Program Development Objective (PDO) Original PDO The PDO is to improve revenue mobilization and transparency in the VAT administration. FINANCING FINANCE_TBL Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Administered Financing 60,000,000 45,839,931 40,015,185 IDA-54260 Total 60,000,000 45,839,931 40,015,185 Non-World Bank Administered Financing Borrower/Recipient 0 0 0 Total 0 0 0 Total Program Cost 60,000,000 45,839,931 40,015,185 5 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) KEY DATES Program Approval Effectiveness MTR Review Original Closing Actual Closing P129770 09-May-2014 11-Jan-2015 16-Mar-2017 30-Jun-2020 30-Jun-2021 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 19-May-2020 40.02 Change in Loan Closing Date(s) Change in Legal Covenants 02-Jun-2020 40.02 08-Dec-2020 40.02 Change in Results Framework Change in Loan Closing Date(s) Cancellation of Financing Reallocation between and/or Change in DLI KEY RATINGS Outcome Bank Performance M&E Quality Moderately Satisfactory Satisfactory Modest RATINGS OF PROGRAM PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 19-Aug-2014 Satisfactory Satisfactory .03 02 19-Feb-2015 Moderately Satisfactory Moderately Satisfactory .03 03 09-Sep-2015 Moderately Satisfactory Moderately Unsatisfactory 11.12 04 14-Mar-2016 Moderately Satisfactory Moderately Satisfactory 11.12 05 30-Jun-2016 Moderately Satisfactory Moderately Satisfactory 11.12 06 20-Jan-2017 Moderately Satisfactory Moderately Unsatisfactory 18.02 07 05-Jun-2017 Moderately Satisfactory Moderately Satisfactory 19.77 08 07-Dec-2017 Moderately Satisfactory Moderately Satisfactory 19.77 09 20-Jun-2018 Moderately Satisfactory Moderately Unsatisfactory 19.77 6 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) 10 24-Dec-2018 Moderately Satisfactory Moderately Satisfactory 19.77 11 19-Jun-2019 Moderately Satisfactory Moderately Satisfactory 27.59 12 06-Feb-2020 Moderately Satisfactory Moderately Satisfactory 40.02 13 25-Jun-2020 Moderately Satisfactory Moderately Satisfactory 40.02 14 23-Jan-2021 Moderately Satisfactory Moderately Satisfactory 40.02 15 17-Jul-2021 Moderately Satisfactory Moderately Satisfactory 40.02 SECTORS AND THEMES Sectors Major Sector/Sector (%) Public Administration 50 Other Public Administration 50 Information and Communications Technologies 50 Public Administration - Information and 50 Communications Technologies Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Economic Policy 13 Fiscal Policy 13 Tax policy 13 Private Sector Development 25 Enterprise Development 25 MSME Development 25 7 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) Public Sector Management 64 Public Finance Management 26 Public Expenditure Management 13 Domestic Revenue Administration 13 Public Administration 38 Transparency, Accountability and Good 13 Governance E-Government, incl. e-services 25 ADM STAFF Role At Approval At ICR Regional Vice President: Philippe H. Le Houerou Hartwig Schafer Country Director: Johannes C.M. Zutt Mercy Miyang Tembon Director: Ernesto May Zoubida Kherous Allaoua Practice Manager: Alexandre Arrobbio Hoon Sahib Soh Winston Percy Onipede Cole, Task Team Leader(s): Tracey M. Lane Syed Khaled Ahsan ICR Contributing Author: Andrew Osei Asibey 8 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) I. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL AND THEORY OF CHANGE Context 1. This Implementation Completion and Results Report (ICR) evaluates the extent to which the objective of the Revenue Mobilization Program for Results: VAT Improvement Program (VIP) has been achieved. The key Program milestones are furnished in table 1. The Program was extended twice, first from June 30 to December 31, 2020, and subsequently to June 30, 2021. The ICR also presents lessons learned during Program implementation. 2. Bangladesh has faced challenges in revenue mobilization. The inefficient tax administration, unwieldy tax organizational structure, capacity and resource constraints, and weak infrastructure were identified as major constraints. Hence, the VIP aimed to address the challenges through the implementation of the Tax Modernization Plan (2011–2016) of the Government of Bangladesh (GOB). There was also a new and enabling 2012 Act on Value Added Tax (VAT). In 2016, the GOB put the implementation of the act on hold for two years and continued to operate the VAT administration under the VAT Act 1991. In August 2017, the World Bank agreed with the National Board of Revenue (NBR) to disentangle the automation and simplification of processes from the implementation of the 2012 Act. Theory of Change (Results Chain) 3. The VIP was designed to provide critical pathways to capacitate the GOB to enhance the organizational capacity of the NBR to put in place the systems and required skilled manpower for improved revenue mobilization. Figure 1 is a simplified Theory of Change of the Program. 9 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) Figure 1. Theory of Change Project Title Revenue Mobilization Program for Results: VAT Improvement Program (VIP) Problem Statement Weak revenue mobilization impedes the ability of GoB to meet the development needs of the people. Key Results Areas Activities Outputs ST Outcomes Medium-Term Outcomes Impact • Formulate a plan for conducting the initial registration of VAT taxpayers • Harmonize the existing BIN with the new TIN • Tax officials trained to reduce Component 1: • • Introduce and strengthen electronic registration personal discretion. • Tax register Increased Improved Operational • Introduce and strengthen e-filing and e-payment • New electronic systems for revenue. • applied. livelihoods Modernization of Establish a centralized refund management registration, filing and tax • Enhanced the VAT Wing of driven by risk-based systems payments promoted • Functional through • Develop operational manual of audit and • Reliability in tax register Training and transparency in increased NBR. investigation installed. tax. • Improve techniques and procedures for recovery capacity building capacity of • System to facilitate quick • Enhanced of tax arrears. turnaround time in tax program the • Develop a program to deal with tax audits and • Communication transparent tax government processing deplored. introduce a centralized appeals case information processes. management system strategy applied. to invest in • Transparent VAT • Develop users and procedure manuals and forms • Automated risk- social and for taxpayer services. system. physical based audit and • Lower number of • Data Centre operationalised refund system infrastructur • Processing Centre request for ghost taxpayers. e. Component 2: • Implement selected Data Centre Supplier implemented. tender prepared and issued • Responsive tax Introduction of an • Make the Data Centre operational. • Improved • Integrated VAT Administration system. Integrated VAT • Prepare and issue Processing Centre request for integration with System (IVAS) tender • Improved IT Management other government Capacity of the System. portals. administration. Component 3: • Design new organizational structure for the VAT • Organisational structure • Increased capacity Wing designed to identify tax Institutional • Develop a comprehensive training and capacity • Training and Capacity building Strengthening and building program program developed evasions. Capacity Building. • Providing consultancy advisors for program implementation, monitoring and evaluation, • Appropriate staff Component 4: financial management, and procurement communication developed Program • Develop and implement an appropriate staff • Training on change communication management designed Management. • Design and deliver training on change management Note: BIN = Business Identification Number; ST = Short-term; TIN = Taxpayer Identification Number. 10 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) Rationale for PforR Support and Program Scope and Boundaries 4. The rationale for using the Program-for-Results (PforR) instrument was that it would support improvements in the Program’s design and strengthen country systems. The policy dialogue with the GOB and the World Bank’s proactivity during preparation had improved the quality of Program design, the links with the GOB’s Tax Modernization Plan, and the use of country systems. The Program’s improved quality is demonstrated in the fiduciary-related disbursement-linked indicators (DLIs), Program implementation, and capacity-building action plan. 5. The VIP had the following four components: (1) operational modernization of the VAT Wing of the NBR, (2) introduction of an Integrated VAT management, (3) institutional strengthening and capacity building, and (4) program management. Component 1 aimed to enable the NBR to ensure a high level of voluntary compliance with the system. Component 2 concentrated on developing three tax types with separate applications culminating in purchasing a configurable web-based commercial off-the-shelf (COTS) VAT administration system. Component 3 aimed to reorganize the VAT system along functional lines and provide training to both administrative and information technology (IT) staff on the IVAS business processes. Component 4 consisted of two parts: (a) coordination and administration and (b) change management and taxpayer communication and education. Program Development Objective (PDO) 6. The PDO was “to improve revenue mobilization and transparency in the VAT administration.” An automated IVAS strived to augment online tax filing and returns as well as e-payment. The IVAS intended to provide access to all—small, medium, and large—taxpayers. The system was designed to put tax administrators and VAT taxpayers at the same level regarding access to information and usage. Key Expected Outcomes and Outcome Indicators 7. Expected high-level outcomes are (a) increased VAT revenues, and (b) greater transparency in the VAT administration. 8. The indicators that were selected to measure success in achieving the PDO are (a) VAT revenues collected as a percentage of GDP1 and (b) compliance with the Right to Information Act (RTI) 2009 legislation. Program Results Areas and DLIs 9. Result areas are stated in paragraph 7. The Program defined the following five DLIs that, when achieved, triggered fund release by the GOB treasury: (a) VAT implementation plan on track, (b) number of active VAT taxpayers, (c) percentage of large taxpayers as defined by the NBR submitting online returns and tax payments, (d) greater transparency of the tax administration, and (e) fiduciary actions. 1 GDP = Gross domestic product. 11 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) B. SIGNIFICANT CHANGES DURING IMPLEMENTATION Revised PDO, Outcome Targets, Result Areas, and DLIs 10. The PDO remained unchanged throughout the implementation of the VIP. However, the Program encountered challenges at the early stage, which required changes to the approach. The tax/GDP ratio target was replaced with an absolute increase in revenue to avoid unexpected variations in measurement. The use of tax/GDP ratio posed challenges due to delay in publication of national accounts data. Following the Program’s midterm review (MTR), March 16–30, 2017, and the successive mission from June 4 to 8, 2017, the NBR and World Bank team agreed to change the original PDO-level results indicators as presented in table 1. Table 1. Modifications to the PDO-Level Results Indicators Original PDO Results Indicators Revised PDO Indicators PDO Indicator 1: VAT revenue collected as a percentage of GDP Increase in VAT revenues (Number in Thousands) PDO Indicator 2: Compliance with the availability of information Greater transparency of the tax listed in the RTI rules and regulation administration 11. Rationale for changes in DLIs. Given their similarities, the previous DLI 3: Number of taxpayers who filed online and DLI 4: Percentage of VAT Large Taxpayer Unit taxpayers who paid online were merged as “DLI 3: Percentage of large taxpayers submitting online returns and tax payments.” With limited time left for implementation because of the challenges posed by the COVID-19 pandemic, the Program was extended twice from June 2020 to December 2020 and later to June 2021. An amount of SDR 9,934,380.50 (approximately US$14 million) was cancelled from the proceeds of the credit. To accommodate the cancelled amount, adjustments were made to the following disbursement-linked results (DLRs): • DLR 1.2.4 for VAT refund system setup was modified to achieve at least 25 percent of the functional requirements. • DLR 1.2.5 for VAT audit system setup. • DLR 3.3 for 90 percent of the large taxpayers filling their returns and paying taxes online was dropped. Other Changes 12. The COVID-19 pandemic led to intermittent countrywide shutdowns since March 26, 2020. The shutdown delayed Program implementation and affected the disbursement rate. There was a risk that the Program would fail to complete the rollout of the IVAS modules, thus jeopardizing the remaining DLIs and threatening the progress made toward PDO achievement. The NBR team, supported by the World Bank, responded by preparing a new implementation plan with forecast expenditures, necessitating a Program restructuring in November 2020. Rationale for Changes and Their Implication for the Original Theory of Change 13. The changes to indicators made them more measurable. The restructuring of the implementation plan allowed the Program to respond to implementation delays caused by the COVID-19 pandemic. 12 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) II. OUTCOME A. RELEVANCE Relevance of PDO 14. The ICR rates the PDO statement as relevant at design and throughout Program implementation. The Program supports the World Bank's Country Assistance Strategy, (CAS, 2011-2015) governance objective of “enhanced transparency and accessibility of public services” and the downstream governance support for revenue mobilization of the Country Partnership Framework (CPF, 2016-2020) by enhancing transparency in VAT administration and improving taxpayer services through the IVAS. The GOB needed to revamp the institutional and organizational setup for VAT administration to resolve the low revenue collection. It needed to retool infrastructure (hardware and software) to facilitate an automated return filing and payment system for taxpayers. The automation process was the NBR’s bedrock to modernize its tax administration. Relevance of DLIs 15. The DLIs were relevant and aligned to the PDO. The Program developed 16 IVAS modules, of which 13 remained operational. The NBR is yet to make policy decisions on three partially completed modules but not yet ‘live’ (audit, risk management, and objection and litigation). Furthermore, integrating the IVAS with key service providers in public and private sectors to promote data exchange and authentication enhanced transparency in VAT administration. The staff were being trained to ensure functioning of the IVAS. The taxpayers reported difficulties in using a few modules for transactions such as online filing of tax returns, inability to amend tax submissions online, and the unavailability of e- payment system. The call centers could not handle technical queries. Overall, there was room for improvement toward making an optimally user-friendly IVAS. Rating of Overall Relevance 16. The relevance of the PDO is rated High. The DLIs provided the incentive to meet the revenue and transparency dimensions of the PDO. The IVAS achievements to date, despite persistent implementation challenges, demonstrate that the VIP is highly relevant. The VIP played a catalytic role in revenue mobilization by creating systems, human, and institutional capacity for continuous improvement of VAT administration. B. ACHIEVEMENT OF PDOs (EFFICACY) 17. The Program partially achieved its PDO. VAT revenues reached BDT 810.5 billion (US$956.0 million) in FY2019–20, short of the BDT 914.1 billion (US$10.8 billion) target.2 The VAT-to-GDP ratio in the original Program design was also not reached. VAT revenues declined from 3.2 percent of GDP in FY2012– 2 https://mof.gov.bd/sites/default/files/files/mof.portal.gov.bd/budget_mof/c5933641_4d17_484e_862f_1110a964be33/ST_01 _E.pdf. 13 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) 13 to 3.0 percent of GDP in FY2019–20. The level of transparency of VAT administration increased in compliance with the 2009 RTI Act’s disclosure requirements. 18. During the assessment of the PDO achievement, it was important to focus on the extent to which the PDO indicators as well as the associated DLIs/DLRs and the intermediate results (IRs) were effectively and efficiently achieved. The PDO statement was precise even though measurement of transparency was fraught with definitional and attribution challenges. This is because transparency in tax modernization had several dimensions, which may not have been fully covered under the Program. The Tax Modernization Plan 2011–2016 had a target of boosting tax-to-GDP ratio of 12.2 percent. The target had to be scaled down and later dropped. Assessment of Achievement of Each Objective or Outcome 19. Annex 1 provides a summary of achievement of the PDO. Besides, the NBR website has abundant resources for the wider audience including the taxpayers. Efficacy rating combines the achievement of the DLRs with that of the IRs. Good progress was made toward the achievement of the IRs. However, the adoption of the IVAS modules was slow. Rating of Overall Efficacy 20. The overall efficacy rating is Substantial. Actual VAT collection increased from BDT 546 billion in FY2016–17 to BDT 850 billion in FY2019–20 and dropped to BDT 810 billion in FY2020–21, short of the target of BDT 914 billion, due to the COVID-19 pandemic that resulted in a slowdown of economic activities. The Program successfully established the IVAS. At the time of the ICR, approximately 287,500 VAT taxpayers were registered and eligible to file their VAT tax returns online. There is now greater transparency in VAT administration as measured by the public disclosure requirements in the 2009 RTI Act. Also, 60 percent of large taxpayers are now submitting online returns and using e-payments through 11 commercial banks, and the coverage will increase when more banks are connected to the national payment gateway. The average time to process and issue tax refunds reduced from the baseline of 120 to 90 days. Going forward, compliance measures can be enforced through implementation of the audit, risk management, and litigation modules and integration with the tax and customs systems. The NBR has taken measures to overcome the existing constraints and shift from the parallel paper-based processes to improve efficiency. However, it would require paying greater attention to change management issues to bring both the administrators and the VAT taxpayers on the same page. 21. The revised nominal targets revenue mobilization objectives introduced at restructuring were not met. The Program originally sought to raise an additional 1 percent of GDP in VAT revenues by its conclusion. This target was not met, and VAT revenues declined as a share of GDP during implementation. Assessment of Efficiency and Rating 22. The use of the PforR instrument led to some efficiency gains. Through the PforR, the GOB had the flexibility to fund the Program from its own financial resources before disbursements to the treasury for DLI achievement. The GOB’s financing on the expenditure framework for the Program is based on its Program’s Development Project Proposal. The use of the country fiduciary system helped the Program reduce time and have contributed to strengthening the system. 14 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) Economic Analysis 23. The original design anticipated a positive net present value based on projected savings in tax administration costs and taxpayer compliance costs. As the GOB established electronic filing systems, NBR salaries, IT expenditures, and administrative expenses would decline. At the same time, taxpayers would realize substantial compliance savings by using the streamlined electronic system. Furthermore, the Program’s original design sought to mobilize an additional 1 percent of GDP in VAT revenues. 24. The Program partially achieved VAT administrative savings, although administrative expenditure data are limited. The Program’s initial economic analysis calculated the NBR’s cost of VAT collection at 1.75 percent of VAT revenues and anticipated that this would decline to 0.54 percent by the end of the Program. The design document did not clearly identify how NBR costs would be attributed specifically to VAT collections, and the NBR did not monitor costs during implementation. The ICR assessed performance using available data, dividing total expenditure outturns from the Internal Resources Division (IRD) by VAT collections. Findings indicated that the total cost of revenue administration (of all tax types) declined from 1.79 percent of VAT revenues in FY2012–13 to 1.30 percent of VAT revenues in FY2019–20, the last year for which expenditure outturn data are available (figure 2). While collection costs have declined with increasing automation across the NBR, the originally envisaged administrative savings have likely not yet been achieved for VAT administration because manual paper processes are still being used in parallel to the automated VAT system. Figure 2. Cost of Collection (Total IRD Expenditure/VAT Collection) 1,200 2.50% 1,000 2.00% 800 1.50% 600 1.00% 400 200 0.50% - 0.00% FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 VAT IRD Expenditure IRD Expenditure/VAT 25. Taxpayer compliance costs likely remained high. The Program design provided a wide-ranging estimate of baseline compliance costs between 2 and 10 percent of VAT revenues. The design anticipated that VAT automation and simplification would reduce compliance costs by 2 percent of VAT revenues. Baseline data on taxpayer collection costs were neither collected nor measured during implementation. Anecdotal evidence suggests that taxpayers continue to face high compliance costs, driven in part by complex and distortive VAT legislation implemented in 2019, which introduced multiple standard VAT rates. Continued use of paper-based systems also limits the ability of the electronic filing system to accurately match receipts, limiting the potential compliance savings associated with the electronic system implementation. 15 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) 26. The stagnation in VAT revenues is also clear in the c-efficiency measurement, which divides VAT revenues by the product of the standard VAT rate and consumption.3 Over Program implementation, c- efficiency is estimated to have declined marginally from 29.4 percent in FY2012–13 to 29.3 percent in FY2020–21. This performance was caused by policy and compliance gaps, which cannot be attributed solely to Program implementation. Justification of Overall Efficiency Rating 27. The overall efficiency rating is Modest. The Program did not achieve all the DLRs as preparatory activities were delayed due to the pandemic shutdowns. Hence, a few DLRs, which could not be achieved, were dropped. The DLRs that were achieved are not sufficient to cover advances made earlier to the GOB treasury and the GOB needs to refund advances estimated at US$2.9 million. However, the extension of the Program and cancellation of funds for the dropped DLRs enabled the NBR to cover the cumulative disbursement with spending against the Eligible Expenditure Program (EEP). C. JUSTIFICATION OF OVERALL OUTCOME RATING 28. The overall outcome rating of the VIP is derived from the sub-ratings for relevance and efficacy and is determined as Moderately Satisfactory. The nature/scope of the 2020 Program restructuring did not institute any modification to the Program’s objectives or outcomes, and therefore, use of split ratings is not applicable in this context. Table 2. Outcome Rating Relevance Efficacy Overall Outcome Objective Design Objective 1 Objective 2 Increased VAT revenues Greater transparency in VAT administration High High Overall: Substantial Moderately Satisfactory Modest High D. OTHER OUTCOMES AND IMPACTS (IF ANY) Gender Not applicable. Poverty Reduction and Shared Prosperity 29. The PforR instrument that was pioneered in Bangladesh through the VIP has contributed to the poverty reduction and shared prosperity goals of the World Bank. The fund was directly channeled to the GOB’s treasury to finance activities to strengthen the revenue administration in Bangladesh in line with the Program’s EEP. The increased revenue base has helped strengthen the minimum threshold to 3For more a more detailed review of the c-efficiency methodology, see https://www.imf.org/en/Publications/WP/Issues/2017/07/11/The-Evolution-of-Potential-VAT-Revenues-and-C-Efficiency-in- Advanced-Economies-45015. 16 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) finance basic state functions such as health, education, social protection, public safety, and transportation. III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING PREPARATION 30. Factors that contributed to the successful preparation and implementation of the VIP include the following: (a) The NBR benefitted from the World Bank’s technical advice on the contents of the Program during the preparation. Early procurement of vendors like Program Management Consultancy positioned the NBR to adequately engage with the World Bank team to agree on Program components. (b) Organization of tax outreach programs to sensitize taxpayers about the rollout of the IVAS and its benefits was timely. There were annual surveys to learn about user satisfaction. At the time of the ICR, the NBR had published only one taxpayer satisfaction survey. (c) The NBR took steps to accelerate the new VAT Act implementation by publishing Value Added Tax and Supplementary Duty Rules gazetted on November 3, 2016. The rules provided a detailed explanation of the business processes and standard operating procedures, covering registration, tax return submissions, tax payment refunds, and so on. About 816 staff of the NBR benefited from the training on the new VAT Act. B. KEY FACTORS DURING IMPLEMENTATION Pre-COVID-19 Pandemic 31. There were two significant constraints to Program implementation before the pandemic: (a) slow disbursement rate and (b) frequent turnover of Program management staff, especially program directors (PD). At the MTR in March 2017, the Program had disbursed US$19.25 million, or 36.8 percent of the Program cost. However, SDR exchange rate fluctuations reduced the total Program cost of US$60 million to US$52.33 million. The VIP had seen four PDs since its inception. This frequent change of leadership posed considerable implementation challenges. The COVID-19 Pandemic 32. The COVID-19 pandemic that led to several rounds of countrywide shutdown, as mentioned earlier, severely affected VIP operations. Consequently, the Ministry of Finance requested the World Bank to extend the Program closing date to December 31, 2020, from the originally scheduled date of June 30, 2020. The pandemic forestalled scheduled training of IT staff and other VAT officials on the SAP and technical assistance to mainstream the IVAS and business processes.4 The revised implementation 4 Aide Memoire, Implementation Support Mission, May 13, 2020. 17 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) plan prepared by the Program, which was the basis for Program extension, helped get things back on track. IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION M&E Design 33. The Program anchored its monitoring and evaluation (M&E) design in the PDO-level results indicators, the intermediate-level results indicators defined in the Results Framework, and the DLRs. There were six DLRs whose achievements triggered release of funds to the GOB treasury. The PDO-level indicators were revised to make them easier to measure. M&E Implementation 34. The GOB conducted M&E through the Implementation Monitoring and Evaluation Division (IMED), Ministry of Planning. The IMED was responsible for tracking and reporting on activities and results. The Program Implementation Unit (PIU) prepared quarterly and annual activity and Program performance reports and submitted them to the IMED and the World Bank. These reports provided useful inputs to the World Bank’s implementation support and supervision missions. 35. The Economic Relations Division (ERD), Ministry of Finance, organized independent verification missions to assess the DLI/DLR achievements. They conducted about eight missions before the Program was closed. The findings of the verification missions provided benchmarks and evidence for the NBR to request funds reimbursement from the World Bank. 36. The progress reports prepared by the PIU contributed to the Implementation Status and Results Reports (ISRs) and Aide Memoires prepared by the World Bank team. The Aide Memoires contained matrices with agreed actions with timelines that informed the PIU, NBR, and World Bank about the Program implementation agreements and outstanding tasks. M&E Utilization 37. The M&E utilization was Satisfactory. From Program effectiveness of January 11, 2015, to date, the World Bank issued 12 ISRs and an equal number of Aide Memoires. The Aide Memoires served as a valuable source of data and evidence to prepare the ISRs. The M&E data informed course corrections, lessons learned, and Program management. For example, as mentioned earlier in this report, M&E data informed restructuring, including changes to the DLIs/DLRs and targets. Justification of Overall Rating of M&E Quality 38. The overall M&E rating is Modest. The GOB, supported by the World Bank team, delivered substantially on M&E quality at design and implemented. The M&E activities were satisfactory regarding design, and indicators were SMART5 and fully aligned to the Program’s PDO and storyline. The targets 5 SMART = Specific, measurable, achievable, relevant, and time bound. 18 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) were adequate, which allowed the Program to track progress consistently. Also, the GOB provided data to the World Bank as and when required. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE Environmental and Social 39. The Program was compliant on environmental and social factors. The PIU trained the NBR IT staff to handle e-waste. The PIU engaged with citizens through an active call center to receive feedback and manage grievances. The user satisfaction survey conducted by the PIU/NBR also helped gather information on citizens’ needs and concerns. Fiduciary 40. There are unresolved audit observations between FY2013–14 and FY2019–20. Seven observations from Part A involve reported financial irregularities of US$1.25 million and six from Part B concern reported financial irregularities of US$0.04 million. As per the World Bank’s Policy, significant unresolved audit issues can hamper approval of a new credit. Disbursement 41. The cumulative Program expenditure of US$43 million adequately covers the World Bank’s total disbursement of US$41 million. As of November 17, 2020, the World Bank canceled an amount of SDR 9,934,380.50 (approximately US$14 million) from the proceeds of the credit. The value of additional DLRs met during the extension period was used to adjust the remaining advances but was insufficient, leading to US$2,936,280 unadjusted advance. Per provisions of the Financing Agreement, the GOB shall make the refund to the World Bank. Procurement 42. Procurement activities are implemented by the VAT Online Program Office, which prepared procurement plans annually and implemented them accordingly. The PIU was yet to send a detailed update of the post-procurement review carried out by the NBR. C. BANK PERFORMANCE Quality at Entry 43. The quality of entry is rated Satisfactory. The VIP benefitted from greater due diligence and scrutiny before the Board approved the Program. Internally, the Program fulfilled all operational requirements before the Regional Operations Committee review on December 12, 2013. The World Bank team extensively consulted the objective and scope of the Program with all relevant agencies in the GOB, namely, the NBR, ERD, Planning Commission, Finance Division, and IMED. This engagement culminated in the preparation of the Program Appraisal Document (PAD). The consultations engendered a greater trust between the NBR and the World Bank. 19 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) Quality of Supervision 44. The VIP received considerable support through frequent implementation support missions. Of 13 missions, 3 were done virtually due to the COVID-19 situation. There were four changes of task team leader (TTL) during the implementation of the Program. However, through coordinated efforts, the TTLs ensured that messages to the NBR were on point, consistent, and evidence based, which contributed to mitigating challenges. Justification of Overall Rating of Bank Performance 45. The ICR rates World Bank Performance as Satisfactory because there were no shortcomings during entry and supervision. The implementation support missions resulted in the preparation of the Aide Memoires and ISRs which provided useful information to the World Bank team and PIU for follow- ups. Above all, the systematic World Bank supervision missions contributed greatly to ensuring that implementation challenges were promptly dealt with and suggestions were provided to the implementing entity to resolve them. D. RISK TO DEVELOPMENT OUTCOME 46. Inadequate on-the-job training for both the IT and administrative staff could hinder the efficient operation of the IVAS. Significant gaps in the functionality of the IVAS, such as the shortage of the hardware and software necessary to run the system, may constrain accessing essential applications such as online filing of VAT returns, e-payments, and refunds. 47. Despite the absence of an Investment Project Finance (IPF) component to provide technical assistance, the Strengthening Public Expenditure Management Program - Bank Executed Trust Fund (SPEMP-BETF) supported gap analysis and proposed a road map for a well-functioning IVAS that included SAP Competency Center (SAP-CC) road map and related training, Business Process Mapping, e-Payment Process Assessment, IVAS System Functionality Assessment and Reforms Action, How-to Guide on Quality Control of Taxpayer Registry, Training Needs Assessment and Report, and Training Plan. V. LESSONS AND RECOMMENDATIONS 48. The key lessons learned from the VIP are as follows: • Unanticipated events such as the COVID-19 pandemic could have undermined the Program implementation and results. The pandemic created a situation that proved the value of digitalization, evidenced by the increased use of the VAT e-payment module. • The GOB/NBR/PIU should have followed up on EEP implementation from the Program’s outset. This proactivity would have helped in avoiding the refund situation. • The manual VAT filing persists despite the introduction of the online system. In initiatives like the VIP, it would be critical to implement a change management program and communication plan with the external stakeholders, including the taxpayers. • Policies, legal framework, and commitment should be aligned with IT implantation. Audit, risk management, and objection (or dispute resolution) and litigation are elements of digital 20 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) tax elements to strengthen large taxpayer compliance that were not implemented due to lack of a required Statutory Regulatory Order. As three key elements remain nonoperational and a complete transition to electronic filing and payment processes is yet to be fully mainstreamed, VAT c-efficiency shows that the tax gap was not reduced by the Program.6 • A critical success factor for such IT-related reforms is the need to consider use of a complementary IPF component to finance major investments and technical assistance to support the required institutional reorganization and business process reengineering. In addition to the training provided by the SPEMP-BETF to strengthen revenue forecasting capacity, support was provided to the NBR in developing strategies to strengthen capacity for (a) tax policy to broaden the tax base with equity and fairness, (b) tax administration to modernize and focus on digitization including use of data analytics for evidence-based decision-making, and (c) voluntary compliance to reduce compliance costs through taxpayer education and removing binding constraints to build taxpayer trust. Leveraging Development Policy Financing can help implement key policy measures, for example, institutional reorganization along functional lines instead of tax type, enforcement of uniform VAT rate for all consumption, and risk-based audit and cross-validation of VAT and income tax records. • The Program closure report of the independent verification agent recommended to engage a consultant who has expertise both in VAT and associated information technology. It would help the NBR in configuring the SAP system appropriately to utilize its powerful capability and make the IVAS a state-of-the-art system. • Future strategies for the domestic resource mobilization should highlight issues like the capacity enhancement on VAT policy and administration and voluntary compliance. That would augment revenue collection in Bangladesh. • The NBR needs to establish an SAP-CC and develop a pool of SAP-certified staff. Until the NBR establishes the SAP-CC, it would need a suitable alternative to sustain the IVAS. • Finally, the cybersecurity of the IVAS is of high priority. Security measures must be in place through a detailed implementation policy, procedures, and 24/7 monitoring, supplemented with periodic security checks following standard procedures. . 6The c-efficiency ratio is the most commonly used indicator for evaluating the revenue performance and overall efficiency of the VAT system. It is simply the ratio of actual revenues to theoretical revenues from a perfectly enforced tax levied at a uniform rate on all consumption. 21 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) ANNEX 1. RESULTS FRAMEWORK, DISBURSEMENT LINKED INDICATORS, AND PROGRAM ACTION PLAN Annex 1A. RESULTS FRAMEWORK (i) PDO Indicators Objective/Outcome: Increase in VAT revenues (Numbers in Thousands) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Increase in VAT revenues Number 686,800,000.00 914100000.00 810,000,000.00 (Thousand) 30-Jun-2017 30-Jun-2020 31-May-2021 Comments (achievements against targets): Number in Billion Taka. http://nbr.gov.bd/uploads/publications/IMG_20190805_00081.pdf http://nbr.gov.bd/uploads/publications/2016-17_Vat_Saroni.pdf http://nbr.gov.bd/uploads/publications/IMG_20200903_0002.pdf Objective/Outcome: Greater transparency of the tax administration Page 22 of 37 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Greater transparency of the Text Baseline Non-existent No online tax system The website provides tax administration (2012-13) information on e- services, regulations, forms, FQs, & enabling structures, systems, processes, and designated Right to Information (RTI) official. 30-Jun-2013 30-Jun-2020 09-Jun-2021 Comments (achievements against targets): A total of 266,413 taxpayers have been registered online as of June 9, 2021. Cumulative VAT collection are disclosed on the NBR website. (ii) Intermediate Results Indicators Results Area: Increased VAT revenues Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IR Indicator 1.1: VAT Text VAT Implementation VAT registration, Thirteen out of the Implementation Plan on Plan endorsed by collection, refunds, sixteen IVAS modules and audit systems implemented are Page 23 of 37 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) Track Minister of Finance setup operational with three awaiting policy decisions for ‘go-live’. Currently more than 100,000 returns are processed monthly. 01-Jul-2013 30-Jun-2020 09-Jun-2021 Comments (achievements against targets): The VIP PIU indicated that some functional requirements needed to be modified or dropped to comply with the latest amendment of the VAT and Supplementary Duty Act, 2012. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IR Indicator 1.2: Number Number 80,000.00 104000.00 184,710.00 active VAT Taxpayers (in 000) 01-Jul-2016 30-Jun-2020 31-May-2021 Comments (achievements against targets): Average for five months is 166,188. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Page 24 of 37 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) IR Indicator 1.3: Percentage Percentage 0.00 90.00 60.00 60.91 of large taxpayers submitting on-line returns and VAR 01-Jul-2016 30-Jun-2020 14-Jan-2021 30-Apr-2021 payments Comments (achievements against targets): Out of the 110 registered Large Taxpayer Units (LTUs), 67 are reported to be submitting returns online and making payments. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IR Indicator 1.4: Value of VAT Number 0.00 105000000000.00 2,558,960,449.00 e-payments (Thousand) 29-Jun-2018 30-Jun-2020 31-May-2021 Comments (achievements against targets): BDT2,558,960,449 was processed using e-payment between December 2020- May 2021. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IR Indicator 1.5: Number of Number 99,999.00 77777.00 0.00 VAT stop filers 29-Jun-2018 30-Jun-2020 09-Jun-2021 Page 25 of 37 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) Comments (achievements against targets): Number of stop filers has been reducing each month with the increase in online returns submission since the inauguration in October 2019. Currently, there is no stop-filers. However, NBR is in the process of finalizing a methodology for IVAS to track stop filers systematically. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IR Indicator 1.6: Average Days 120.00 120.00 90.00 time to process and issue tax refunds 29-Jun-2018 30-Jun-2020 09-Jun-2021 Comments (achievements against targets): 90 days on an average, while sometimes, field offices complete some of the refund cases in less than 30 days. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IR Indicator 1.7: Percent of Percentage 20.00 25.00 0.00 audits per year resulting in additional tax assessments 23-Dec-2018 30-Jun-2020 30-Jun-2021 Comments (achievements against targets): The Audit Module that is under development was dropped from disbursement requirement. The percentage of audits resulting in additional tax assessments could not be determined because section 19 sub-section 2 of the new VAT Act 2012 requires a VAT manual to carry out any VAT audit. a. This indicator is not met. Page 26 of 37 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) Results Area: Greater transparency Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IR Indicator 2.1: Fiduciary Text At least 50% of the 75 percent of National 75% of NCB contracts Action Program’s competitive Competitive Bidding are done through E- bidding contracts (NCB) contracts are GP (it is met), granted during the done through remaining 11 out of 23 First Fiscal Year has electronic outstanding audit been carried out Government observations need to through electronic Procurement (eGP); be settled with FAPAD government All significant audit (is not met) and procurement (e-GP); objections resolved in quarterly fund During the First Fiscal 6 months; Submit utilization reports are Year a fund utilization quarterly fund submitted to FD and report has been utilization report to FD fund release processes submitted by the NBR & complete fund is completed each to the Finance Division release processes quarter (is met). on a quarterly basis; after each quarter Audit observations considered significant have been resolved in a satisfactory manner within 6 months from the reception of the annual reports. Page 27 of 37 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) 30-Jun-2015 30-Jun-2020 09-Jun-2021 Comments (achievements against targets): The indicator is partially met. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IR Indicator 2.2: Greater Percentage 0.00 75.00 72.00 taxpayer satisfaction with services 30-Jun-2014 30-Jun-2020 20-Dec-2020 Comments (achievements against targets): A survey report published on NBR website - http://nbr.gov.bd/uploads/public-notice/NBR_2017_PDF.pdf According to Taxpayer Satisfaction Survey Report, 2017, the following satisfaction index was registered: NBR - 90%, VAT online - 92%, Commissionerate - 59% and Divisional VAT office - 66%. The second Satisfaction Survey Report is expected to be available by September 30, 2021. ANNEX 1B. DISBURSEMENT LINKED INDICATORS DLI IN01042460 TABLE Page 28 of 37 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) DLI 1: DLI 1: VAT Implementation Plan on Track (Text) Baseline Prior Results FY2017-18 FY2018-19 FY2019-20 Total Original values 34.50 0 Actual values Allocated amount ($) 4.50 16.00 7.00 7.00 30.00 Disbursed amount ($) 4.50 16.00 7.00 7.00 30.00 Comments (achievements against targets): The 9th and final independent verification mission by Deloitte confirmed the following level of implementation of the agreed functional requirements: • DLR #1.2.2: VAT Registration System – 97.14% • DLR #1.2.3: VAT Collection System - 85.53% • DLR #1.2.4: 24% of VAT Refund System - 61.36% DLI IN01042461 TABLE DLI 2: DLI 2: Number of active VAT taxpayers (Number) Baseline Prior Results FY2017-18 FY2018-19 FY2019-20 Total Original values 8.00 0.00 0.00 0.00 0.00 Actual values 0.00 0.00 0.00 0.00 Allocated amount ($) 0.00 3.00 2.50 2.50 8.00 Disbursed amount ($) 0.00 3.00 2.50 2.50 8.00 Page 29 of 37 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) Comments (achievements against targets): Average number of active VAT taxpayer for five months is 166,188 (Jan-May 2021) The footnote in the October 2018 second FA amendment reads thus: “Active Taxpayer being a registered taxpayer who over the last year (12 consecutive months) has either filed VAT return or paid at least once”. A Registered Taxpayer is one with a Business Identification Number (BIN) to whom NBR can issue a Taxpayer Identification Number. Therefore, VAT deducted at source (VDS) from a non-registered person/business does not qualify as an active taxpayer and should not fall within the baseline calculation. DLI IN01042462 TABLE DLI 3: DLI 3: Percentage of large taxpayers submitting online returns and tax payments (Number) Baseline Prior Results FY2017-18 FY2018-19 FY2019-20 Total Original values 7.50 0.00 0.00 0.00 0.00 Actual values 0.00 0.00 0.00 0.00 Allocated amount ($) 0.00 2.50 2.50 2.50 7.50 Disbursed amount ($) 0.00 2.50 2.50 2.50 7.50 Comments (achievements against targets): As per the last verification conducted in May 2021, of the 110 registered Large Taxpayer Units (LTUs), 60.91% of large taxpayers as defined by the NBR are submitting online returns and tax payments. DLI IN01042463 TABLE DLI 4: DLI 4- (Now merged with DLI-3) (Percentage) Page 30 of 37 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) Baseline Prior Results FY2017-18 FY2018-19 FY2019-20 Total Original values 0.03 0.00 0.00 0.00 0.00 Actual values 0.03 0.00 0.00 0.00 Allocated amount ($) 0.03 0.00 0.00 0.00 0.00 Disbursed amount ($) 0.03 0.00 0.00 0.00 0.00 DLI IN01042464 TABLE DLI 5: DLI 5 - Greater transparency of the tax administration (Text) Baseline Prior Results FY2017-18 FY2018-19 FY2019-20 Total Original values 5.00 Actual values Allocated amount ($) 0.00 2.00 1.50 1.50 5.00 Disbursed amount ($) 0.00 2.00 1.50 1.50 5.00 Comments (achievements against targets): Cumulative VAT collection amounts are disclosed on the NBR website. Refund amount is disclosed (in Bangla). According to Taxpayer Satisfaction Survey Report, 2017 published on NBR website, the following satisfaction index was registered: NBR - 90%, VAT online - 92%, Commissionerate - 59% and Divisional VAT office - 66%. The second Satisfaction Survey Report is now expected by August 2021. NBR was advised to use complementary online survey mechanisms. A second Taxpayer Satisfaction Survey was being conducted using online platforms due to the COVID-19 pandemic but not published as at time of the ICR. VAT appeals are resolved in less than six months on average. Page 31 of 37 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) Transparency has improved with publication of regulations and interpretations; cumulative VAT collection NBR website; and taxpayers’ satisfaction survey report. DLI IN01042465 TABLE DLI 6: DLI 6 - Fiduciary Actions (Text) Baseline Prior Results FY2017-18 FY2018-19 FY2019-20 Total Original values 4.96 Actual values Allocated amount ($) 2.00 1.00 1.00 0.96 2.96 Disbursed amount ($) 2.00 1.00 1.00 0.96 2.96 Comments (achievements against targets): 75% of NCB contracts that could be processed through e-GP were done through e-GP. Not met because of lapse of time of deadline to resolve significant audit objections in 6 months. As on the date of Deloitte’s final verification, the significant audit objections were not resolved in 6 months. VIP is following up on the replies and relevant documents provided to Foreign Aided Project Audit Directorate (FAPAD). Quarterly fund utilization reports are submitted to FD and fund release processes were completed each quarter as verified during the third and fourth Verification Mission. ANNEX 1C. PROGRAM ACTION PLAN PAP_TBL Achieved Action Timing Completion Measurement (Yes/No) Page 32 of 37 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) 1.By no later than June 30, 2016,the Recurrent Yearly Yes By no later than June 30, 2016 Recipient shall establish Active Registered Baseline ref. to in DLR#2.1, On-line Filing Baseline ref. to in DLR#3.1 and LTU Baseline ref. to in DLR#4.1 of the table set forth in Sec. IV.A.2 of Schedule 2 to FA. Comments: As per the final independent verification conducted in May 2021, out of the 110 registered Large Taxpayer Units (LTUs), 60.91% of large taxpayers as defined by the NBR are submitting online returns and tax payments. 2a. The Recipient shall carry out, under Due Date 30-Jun-2015 Yes Final survey report published on NBR website - terms of reference acceptable to the http://nbr.gov.bd/uploads/public- Association, the following independent notice/NBR_2017_PDF.pdf taxpayer satisfaction surveys- 2014 survey by no later than June 30, 2015. Later agreed with GoB to comply with it by June 30, 2016. Comments: Final survey report published on NBR website - http://nbr.gov.bd/uploads/public-notice/NBR_2017_PDF.pdf 2b. The Recipient shall carry out, under Due Date 15-Feb-2019 No Second was survey was being conducted online due terms of reference acceptable to the to COVID-19 pandemic but not published as at time Association, the following independent of the ICR mission in September 2021. taxpayer satisfaction surveys- 2016 survey by no later than June 30, 2017. Comments: Final survey report published on NBR website - http://nbr.gov.bd/uploads/public-notice/NBR_2017_PDF.pdf 2c. The Recipient shall carry out, under Due Date 30-Apr-2021 No Second was survey was being conducted online due terms of reference acceptable to the to COVID-19 pandemic but not published as at time Association, the following independent of the ICR mission in September 2021. taxpayer satisfaction surveys- 2018 survey Page 33 of 37 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) by no later than October 30, 2020. Comments: The VIP PIU could not yet conduct the 2nd taxpayers’ satisfaction survey. The issue was discussed during the implementation completion mission on June 9, 2021. The VIP PIU agreed to conduct an online survey by September 30, 2021. 3.By no later than 12 mnths after Effective Recurrent Yearly Yes As per the agreed fiduciary actions, the VIP is Date, Recipient shall install, & maintain required to install a fixed asset tracking software to throughout imple., a fixed asset tracking record, track and manage assets procured under system in VAT Wing to record, track & the program in VAT Wing of NBR, and train staff in manage assets procured under VIP, incl. its use within one year of Program effectiveness. prov. of trng. to staff.Due date: Sep30,2020 Comments: The June 9, 2021 mission found out that the fixed asset tracking software was installed and fixed asset data recorded. 4.By no later than 1 month after the Due Date 30-Oct-2014 Yes Completed Effective Date, Recipient shall form and maintain throughout implementation of the Program, a 7-member team evaluation committee, under ToR acceptable to the Association, responsible for high value IT procurement Comments: Done. 5.By no later than 6 months after the Due Date 30-Mar-2015 Yes Completed Effective Date, Recipient shall report and thereafter continue reporting throughout implementation of Program, on key procurement indicators agreed with the Association using Recipient’s proc. monitoring systems Page 34 of 37 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) Comments: Done. 6a. By no later than 3 months after the Recurrent Continuous Yes Completed Effective Date, Recipient shall appoint under ToR acceptable to the Association and maintain throughout imp. of the Program, a focal point within ERD. Comments: Done. 6bi.By no later than 3months after Recurrent Semi-Annually Yes Semi-annual reports from Anti-Corruption Effective Date,Recipient shall start Commission through Economic Relations Division collecting and compiling into formats (ERD). agreed with Association, and thereafter continue collecting throughout implementation of the Prog., all Prog fraud and corruption complaint Comments: ERD shared a report on the non-existence of fraud and corruption in the VIP on August 5, 2019.This is the latest update from ERD and covered the period from January to June 2019. 6bii. By no later than 3 months after the Recurrent Semi-Annually Yes Reports submitted Effective Date, Recipient shall submit, throughout implementation of the Program, the aforementioned reports to the Association on a semi-annual basis. Comments: The Anti-Corruption Commission (ACC) as the primary anti-corruption agency in Bangladesh has been submitting sem-annual reports. 7a. By no later than September 30, 2020, Due Date 30-Sep-2020 Yes Completed the Recipient shall carry out training on e- waste handling to IT NBR staff. Page 35 of 37 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) Comments: The VIP PIU has conducted training on e-wastage handling as part of the IT training for the NBR staff. 7b.By no later than June 30, 2015, Recurrent Continuous Yes Records maintained Recipient shall start, and thereafter maintain throughout implementation of the Prog., proper record keeping of equipment purchase, reused and auctioned. Comments: The fixed asset tracking software has been installed and fixed asset data is being recorded of equipment purchase, reused and auctioned. 8. By June 30, 2015, Recipient shall set up Due Date 30-Jun-2015 Yes Contact center set up NBR’s contact center, under terms of reference acceptable to the Association Comments: Done. Up and running. Page 36 of 37 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Preparation Tracey M. Lane Task Team Leader(s) Tanvir Hossain Procurement Specialist(s) Suraiya Zannath Financial Management Specialist Shakil Ahmed Ferdausi Social Specialist Supervision/ICR Winston Percy Onipede Cole, Syed Khaled Ahsan Task Team Leader(s) Arafat Istiaque Procurement Specialist(s) Mohammed Atikuzzaman Financial Management Specialist Razia Nasreen Sultana Team Member Sabah Moyeen Social Specialist Sher Shah Khan Team Member Iqbal Ahmed Environmental Specialist Charles Victor Blanco Team Member Nadee Naboneeta Imran Team Member Mostafijul Hoq Team Member Page 37 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) B. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY12 33.177 141,232.98 FY13 77.670 663,758.72 FY14 83.780 262,597.05 FY15 1.920 -444,140.09 FY16 1.933 -744,054.00 FY17 .900 -20,157.40 Total 199.38 -140,762.74 Supervision/ICR FY14 0 8,904.87 FY15 28.787 374,224.59 FY16 33.766 343,628.85 FY17 42.900 461,893.08 FY18 17.652 106,963.83 FY19 20.778 159,912.67 FY20 22.710 151,503.97 Total 166.59 1,607,031.86 Page 38 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) ANNEX 3. PROGRAM EXPENDITURE SUMMARY Actual Expenditures (Disbursement) Estimates at Source of Program Type of Co- Actual Disbursement is SDR 28.865 million Appraisal (US$, Financing Financing Actual (US$, Percentage of Percentage of millions) millions Appraisal Actual World Bank Joint 60 41.15 69 74 Borrower Joint 12 2.50 21 9 Other Partners — — — — — Total 72 43.65 61 52 Note: Revised estimate as per Revised Annual Development Program was US$83.91 million. Exchange rate: US$1.00 = BDT 85.05; SDR 1.00 = US$1.43 million. The World Bank Client Connection; Date: September 13, 2021. Page 39 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) ANNEX 4. BORROWER’S COMMENTS 1. Following are the excerpts from the NBR’s Program Completion Report dated October 4, 2021: (a) A team shall be involved for LAN management and provide day to day support to the local VAT offices. (b) An annual maintenance and service contact shall be established to manage the problems of DC and DR servers, Network system and storage system. (c) System architecture has developed in 2014 but requirements have changed several times. Proper steps shall be taken to upgrade the hardware and other components. (d) Network bandwidth shall be updated to provide hassle free services. (e) Present location of DRC is not well equipped. It must be changed and establish it a secured place where all facility especially 24 hours electricity service is available from any sources. (f) More trained IT personnel shall be deployed to run the system and configure the system according to the requirement. (g) IT unit shall consist of network team, data base team, integration team, development team (such as registration module team, return module team, refund module team, and so on) and taxpayer’s current issue team. (h) Training program for IT and VAT will be a continuous process. So, several training program shall be taken to make the system sustain. Page 40 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) ANNEX 5. SUPPORTING DOCUMENTS • Implementation Status Results Reports • Revenue Mobilization Program for Results: VAT Improvement Program (VIP) • Final Consolidated Validation / End of Program Report, Third Party Validation (TPV) for FY 2014-19, February 2021 • Mission-8 Verification Report, October 2020, Deloitte. • Aide Memoires • NBR Audit Report Letter (February 22-21); Revenue Mobilization Program for Results: VAT Improvement Program (IDA Credit 5426-BD), Implementation Status Tracking of Program extension Plan • Bank Guidance, Implementation Completion and Results Report (ICR) for Investment Program Financing (IPF) Operations, March 2, 2020 • Audit Inspection Report on the Account of “Value Added Tax and Supplementary Duty Act, 2012 Implementation (VAT: Online) Program” financed by IDA under Credit No. 5426-BD for the year 2019– 2020, February 9, 2021. • Review of External Audit Report for FY2019–20 Letter, February 20,2021 • VIP; Program Appraisal Document, April 15, 2015 • Systematic Country Diagnostic, October 15, 2015 • Second Amendment to the Financing Agreement Letter to Senior Secretary Kazi Shofiqul Azam • The Proactive Disclosure and the Disclosure of Information Regulations, 2010 o http://nbr.gov.bd/uploads/rti/24.pdf o http://nbr.gov.bd/uploads/rti/29.pdf Page 41 of 42 The World Bank Revenue Mobilization Program for Results: VAT Improvement Program (VIP) (P129770) ANNEX 6. SUMMARY OF MODULE WISE STATUS OF OPERATIONAL ACCEPTANCE OF IVAS Page 42 of 42