The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) Revenue Administration Reform Project (P149743) EUROPE AND CENTRAL ASIA | Montenegro | Governance Global Practice | IBRD/IDA | Investment Project Financing | FY 2018 | Seq No: 6 | ARCHIVED on 23-Dec-2020 | ISR44534 | Implementing Agencies: Montenegro, Montenegro Tax Administration Key Dates Key Project Dates Bank Approval Date: 31-Jul-2017 Effectiveness Date: 13-Mar-2018 Planned Mid Term Review Date: 31-Mar-2021 Actual Mid-Term Review Date: Original Closing Date: 31-Mar-2023 Revised Closing Date: 31-Mar-2023 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) The development objective of the project is to improve the effectiveness of operational functions of Montenegro’s tax administration and to reduce the compliance costs for corporate taxpayers. The project supports Montenegro’s long-term vision of a revenue administration that operates with streamlined risk-based business processes that contribute to the efficient collection of taxes and social contributions from all sources of economic activity. Increased compliance will generate a more robust revenue stream to provide essential services to citizens. Improvements in revenue administration capacity will also support the country's goal for EU accession and economic integration with EU member states. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Electronic Fiscal Invoicing:(Cost $5.30 M) Institutional Development:(Cost $1.35 M) Business Processes:(Cost $13.85 M) Taxpayer Services:(Cost $0.23 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Moderately Satisfactory Overall Risk Rating Moderate Moderate Implementation Status and Key Decisions Overall implementation progress and progress towards the achievement of the PDO continue to be assessed as Moderately Satisfactory. The Ministry of Finance (MOF) and Montenegrin Tax Administration (MTA) are set to launch the MTA's Electronic Fiscal Invoicing (EFI) System (supported under Component 4) in January 2021 as planned. Following the re-tendering of the development of the EFI system in March 2020 and despite COVID-19, contract implementation started soon after contract signature in July 2020, and system testing has been completed 12/23/2020 Page 1 of 7 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) with the production phase starting the week of December 14. Communications outreach related to the system’s launch has been carried out by the MTA and MOF and will continue. Under Component 2, the next key activity that needs to be launched is the development of the Integrated Revenue Management System. Under Component 3, a perception survey for taxpayers and staff will be launched during the winter period 2020- 2021. This follows from the baseline survey conducted in summer 2019. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance Moderate Moderate Moderate Macroeconomic Substantial Moderate Moderate Sector Strategies and Policies Moderate Moderate Moderate Technical Design of Project or Program Substantial Moderate Moderate Institutional Capacity for Implementation and Substantial Substantial Substantial Sustainability Fiduciary Moderate Moderate Moderate Environment and Social Low Low Low Stakeholders Moderate Moderate Moderate Other -- Moderate Moderate Overall Substantial Moderate Moderate Results PDO Indicators by Objectives / Outcomes Improve effectiveness of operational functions of MTA IN00924835 ►Tax Gap for VAT (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target No change from previous - VAT Gap Methodology approved VAT Gap Methodology by MTA, baseline set approved by MTA, at 9.81% using 2017 6% reduction in Tax No methodology for Tax baseline set at 9.81% Value data. Calculation of Gap for VAT compared Gap for VAT estimation using 2017 data. 2018 VAT Gap to 2020 value Calculation of 2018 VAT initiated and awaiting Gap initiated. finalization and endorsement by MTA and MOF. 12/23/2020 Page 2 of 7 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) Date 01-Apr-2016 15-Jun-2020 01-Dec-2020 31-Dec-2022 VAT Gap Methodology was approved by MTA and baseline value set. Comments: IN00924977 ►Percentage of tax returns filed on time (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target No change from previous - 82.24 for 82.24 for VAT (CY 2019) VAT (CY 2019) and and 90.63 for CIT (CY 90.63 for CIT (CY 2018) - no significant 2018) - no significant project activities yet on project activities yet on the ground - actual Value VAT: 82; CIT: 89 the ground - actual VAT: 92; CIT: 96 values meet target levels values meet target of 82% and 90%, levels of 82% and respectively, consistent 90%, respectively, with project consistent with project implementation timeline. implementation timeline. Date 31-Dec-2016 15-Jun-2020 01-Dec-2020 31-Dec-2022 No significant project activities yet to impact value of indicator. Values of indicators slightly differ from Comments: previous reported as then now capture full year reporting for VAT (2019) and CIT (2018) recalculated. IN00924978 ►Achieved processing of almost 90% of VAT refund claims within 30 days for predominantly exporters and 60 days for the rest of the taxpayers according to domestic law (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target No change from previous Exporters: 70%; Rest: Exporters: 70% (2019); Exporters: 88%; Rest: Value 65% Rest: 74 (2019) Exporters: 70% 85% (2019); Rest: 74 (2019) Date 31-Dec-2018 15-Jun-2020 01-Dec-2020 31-Dec-2022 2018 data were recalculated (exporters at 65% from earlier reported 70% and rest at 68.78% compared to Comments: 65%). Trend indicate improvements. Project implementation on the ground has yet to take place. Reduce compliance costs for corporate taxpayers IN00924976 ►Time it takes to pay taxes and social contributions (Hours, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 314.00 300.00 300.00 200.00 Date 31-Dec-2015 15-Jun-2020 01-Dec-2020 31-Dec-2022 Current value based on Doing Business 2020. No change from 2019 but levels are above target Comments: levels. No update to Doing Business publication. Overall Comments PDO 12/23/2020 Page 3 of 7 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) There are no significant updates to the results indicators since the last ISR for various reasons. The most critical is that physical progress are not yet translating into the expected results (e.g., EFI system has yet to be fully operational, IRMS is delayed). Other reasons include: follow-up gap analysis is informed by national accounts that are available in the fall; information on tax administration indicators are collected on an annual basis and usually available after March); there is no follow-up to the Doing Business 2020 publication; follow-up perception survey had to be postponed due to COVID-19, among others. Intermediate Results Indicators by Components Institutional Development IN00924979 ►MTA staff satisfaction with the new skills and ability to apply them, disaggregated by gender (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target No change from previous No change from - 68% of MTA staff previous - 68% of MTA respondents indicate staff respondents Increase by 10% Value No baseline satisfaction (men 71%, indicate satisfaction compared to baseline women 66%). 2020 (men 71%, women established in 2019 survey has yet to be 66%). 2020 survey has conducted. yet to be conducted. Date 31-Dec-2016 15-Jun-2020 01-Dec-2020 31-Dec-2022 The results of the first satisfaction surveys conducted in the summer of 2019 were presented in October 2019 to MTA management, the Project Steering Committee and Advisory Board, which includes private Comments: sector stakeholders. They will need to be considered in the development of the change management and communications plan for the project. IN00924983 ►Estimated tax gap is calculated annually and suitable for publication by year 5 (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Follow-up exercise Follow-up exercise Value No initiated to develop initiated to develop Yes (with publication) reports and training. reports and training. Date 31-Mar-2016 15-Jun-2020 01-Dec-2020 31-Dec-2022 Consultancy for establishing methodology extended to inform follow-up exercise, report development and Comments: training. Within target and consistent with project timeline. Business Processes IN00924980 ►Payment compliance rate for VAT (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 62.00 60.00 60.00 87.00 Date 31-Dec-2016 15-Jun-2020 01-Dec-2020 31-Dec-2022 12/23/2020 Page 4 of 7 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) No project activities yet. Current value reflected is for fully year 2019. Previous data of 62% for 2018 was Comments: recently recalculated and set at 61%. IN00924984 ►Payment compliance rate for CIT (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 81.00 80.00 80.00 93.00 Date 31-Dec-2016 15-Jun-2020 01-Dec-2020 31-Dec-2022 Current value is for full year 2019 (compared to previous halfyear data) and is lower than the 81% end- Comments: year target for 2019. Project activities have yet to be implemented. IN00924987 ►Improved selection of taxpayers for audit so that comprehensive audits are centrally selected from the risk analysis system (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target no comprehensive no comprehensive audits audits centrally centrally selected from selected from risk 75% of comprehensive no comprehensive audit risk analysis system - analysis system - audits selected Value centrally selected from consistent with project consistent with project centrally from risk risk analysis system timeline no change from timeline no change analysis system baseline expected at this from baseline time expected at this time Date 31-Dec-2018 15-Jun-2020 01-Dec-2020 31-Dec-2022 Project related activities have yet to be implemented. Comments: Taxpayer Services IN00924981 ►Taxpayers satisfaction with MTA's quality of taxpayers services and integrity of MTA staff, disaggregated by gender (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Baseline survey completed with 82% of Increase by 10% taxpayer respondents Follow-up survey yet Value No baseline compared to baseline satisfied. Follow-up to be deployed. established in 2019 survey in 2020 yet to be deployed. Date 31-Dec-2016 15-Jun-2020 01-Dec-2020 31-Dec-2022 Baseline survey completed. However, the respondents list does not allow for disaggregation of data by gender. Results of the satisfaction surveys that were conducted in the summer of 2019 were discussed in October 2019 with MTA management, Project Steering Committee and Advisory Board, that includes private sector stakeholders. In addition, the results of the survey were presented by the MTA to representatives Comments: of businesses and business associations/alliances in December 2019. Moving forward, they will need to be considered in the implementation of future project activities - particularly the EFI and IRMS. It is noted that initial consultations on the EFI has informed the EFI law that was enacted in the summer of 2019 with respect to providing support for small businesses. IN00924985 12/23/2020 Page 5 of 7 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) ►Increased e-filing for VAT (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 75.00 77.37 77.37 95.00 Date 31-Dec-2018 15-Jun-2020 01-Dec-2020 31-Dec-2022 Full year 2019 data is higher than target value of 75%. Critical project activities have yet to be Comments: implemented. Electronic Fiscal Invoicing (EFI) IN00924982 ►Improved post filing index (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target No change from previous - 70.5 - no increased by 8% from Value 70.49 70.50 follow-up publication baseline issued Date 31-Dec-2018 15-Jun-2020 01-Dec-2020 31-Dec-2022 Awaiting EFI implementation. Data from Doing Business 2020. Comments: IN00924986 ►Real-time information for VAT transactions available to MTA (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target no real time EFI solution EFI contract under EFI system available no real time EFI system in place - contract implementation - roll- Value 99.5% of the time for in place implementation expected out to start on January all transactions to start in July 2020 1, 2021 Date 31-Dec-2018 15-Jun-2020 01-Dec-2020 31-Dec-2022 Awaiting EFI implementation Comments: Performance-Based Conditions Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P149743 IBRD-87720 Effective USD 15.70 15.70 0.00 1.50 14.25 9.5% P149743 IBRD-90130 Effective USD 5.20 5.20 0.00 1.09 4.16 21% 12/23/2020 Page 6 of 7 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P149743 IBRD-87720 Effective 31-Jul-2017 19-Jan-2018 13-Mar-2018 31-Mar-2023 31-Mar-2023 P149743 IBRD-90130 Effective 10-Oct-2019 11-Nov-2019 20-Nov-2019 31-Mar-2023 31-Mar-2023 Cumulative Disbursements PBC Disbursement Achievement Disbursed amount in Disbursement % PBC ID PBC Type Description Coc PBC Amount Status Coc for PBC Restructuring History There has been no restructuring to date. Related Project(s) P170454-Additional Financing for the Montenegro Revenue Administration Reform Project 12/23/2020 Page 7 of 7