The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) Tax Administration Modernization Project (P127734) EUROPE AND CENTRAL ASIA | Moldova | Governance Global Practice | IBRD/IDA | Investment Project Financing | FY 2016 | Seq No: 7 | ARCHIVED on 14-May-2020 | ISR41322 | Implementing Agencies: The Ministry of Finance, The State Tax Service Key Dates Key Project Dates Bank Approval Date: 06-Jun-2016 Effectiveness Date: 25-Jan-2017 Planned Mid Term Review Date: 30-Jun-2020 Actual Mid-Term Review Date: Original Closing Date: 31-Dec-2021 Revised Closing Date: 30-Nov-2023 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) To improve revenue collection, tax compliance and taxpayer services in the Republic of Moldova Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Institutional development:(Cost $0.65 M) IT Infrastructure and system modernization:(Cost $15.76 M) Project management and change management:(Cost $0.59 M) RBF:(Cost $3.00 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Unsatisfactory Overall Implementation Progress (IP) Moderately Satisfactory Moderately Unsatisfactory Overall Risk Rating Substantial High Implementation Status and Key Decisions The project became effective on January 25, 2017. The project is meant to support the implementation of an automated risk-based approach to maximize revenue collection, promote open interaction with taxpayers, and develop a fair, taxpayer-friendly approach to addressing taxpayer grievances. This will allow the State Tax Service (STS) to focus on non-compliant taxpayers, including businesses that avoid paying taxes while reducing compliance costs for taxpayers. The project will also finance the acquisition of a modern revenue management IT system. The long-term vision supported by the project is the creation of client-oriented tax administration. The modernized tax administration will improve the business environment and the country's competitiveness. Implementation of the project was delayed due to insufficient project staffing and delays in decisions about how to go forward with the IT system. In 2018, the STS established a designated Project Implementation Division and conducted a Feasibility Study on possible solutions for the Integrated Tax Management System (ITMS), which was positively evaluated by an independent international consultant. Based on that, in 2019 the Project has been restructured. TAMP restructuring provided for an extension of the Project closing date by 23 months to complete and operationalize the ITMS and the introduction of a new Results-based Financing (RBF) Component with 5/14/2020 Page 1 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) the revision of the Results Framework (RF). The Letters on Amendments to the Loan and Financial Agreements co-signed by the Government of Moldova on August 2, 2019 and ratified by the Parliament in October 2019 came into effect on January 16, 2020. The project has progressed with some activities under the RBF Component. This resulted in disbursements of USD 0.8 mln. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance High High High Macroeconomic High Substantial Moderate Sector Strategies and Policies Substantial Substantial Substantial Technical Design of Project or Program Substantial Low Substantial Institutional Capacity for Implementation and Substantial Substantial Substantial Sustainability Fiduciary Substantial Substantial High Environment and Social Low Low Low Stakeholders Moderate Substantial Substantial Other -- -- Moderate Overall Substantial Substantial High Results PDO Indicators by Objectives / Outcomes To improve revenue collection IN00829525 ►Overall efficiency of VAT collection (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 52.30 51.34 51.34 54.70 Date 31-Dec-2015 01-Jul-2019 31-Mar-2020 31-Dec-2021 Data submitted for 3 months in 2019, according to the available information published by the National Comments: Bureau of Statistics. The indicator is on track. IN00829575 ►DLI: Increased nominal value of the Specific and Minimal Excise Rates for all tobacco products under tariff position 240220 (Text, Custom, PBC) 5/14/2020 Page 2 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) Baseline Actual (Previous) Actual (Current) End Target Specific rates and minimum excise rates by types of tobacco Increased specific Value n/a n/a products as set up in the rates came into effect. Tax Code of Moldova in 2017 Date 31-Dec-2018 10-Sep-2019 31-Mar-2020 03-Jan-2022 This DLI is aimed at reflecting the implementation of the tax policy reform actions supported by the RBF component. DLI 1 includes three Disbursement Linked Results (DLRs). Achievement of this DLI is expected to contribute to improving tax collection. Comments: The Ministry of Finance of Moldova, who is responsible for this DLI, was going to submit relevant changes to the Tax Code in April/May 2020 to be approved by July 2020 , but the situation was changed due to COVID-19 circumstances and new timing is not clear. IN00829578 ►DLI: Ensured that supplies of goods by insolvent subjects have been taxed with VAT on the reverse charge principle. (Text, Custom, PBC) Baseline Actual (Previous) Actual (Current) End Target Due to the legal gap in provisions which stipulates the process of debt cancellation, at the The adopted changes The adopted changes Value time transfer of collected n/a to the Tax Code came to the Tax Code came VAT insolvent subject into effect. into effect. does not have liquidity and this creates budget losses. Date 31-Dec-2018 10-Sep-2019 31-Mar-2020 31-Dec-2020 Archived. This DLI 2 aims to reflect the tax policy reform implementation under the RBF Component and shall contribute to improving revenue collection. DLI 2 has two Disbursement Linked Results (DLRs). This DLI has been fully achieved. The changes to the Tax Code of Moldova (Title 3, art. 93,94, 102, 115) submitted by the Government of Moldova to the Parliament on November 27, 2019 (DLR 2.1.) were Comments: approved by the Parliament on December 19, 2019 and came into effect from January 1, 2020 (DLR 2.1.). The Bank, based on the Government request disbursed against this DLI the amount of 476,700 SDRs ( USD 648,745.80) on March 26, 2020. To improve tax compliance IN00829571 ►Share of active taxpayers (legal entities) filing income declarations in total active taxpayer (legal entities) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 19.35 83.90 86.88 90.00 Date 31-Dec-2015 31-Dec-2018 31-Dec-2019 30-Nov-2023 The target value of 86% set for 2019 has been achieved. Overall, 115 972 active taxpeyers (legal entities) filled income declarations out of total 133 487 active taxpayers in 2019. The income tax returns are submitted annually by the legal entities to the State Tax Service no later than Comments: March 25 of the year following the year of administration. IN00829573 5/14/2020 Page 3 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) ►Increase in additional tax assessed per audit (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 8.70 2.00 34.00 Date 31-Dec-2015 31-Dec-2018 31-Dec-2019 30-Nov-2023 The target level for 2019 year ( +20%) was not achieved (actual was + 2.0%) due to legal changes. The Law no. 180 of 26.07.2018 on Voluntary Declaration and Tax Incentive significantly limited audits on the correctness of the calculation, declaration and payment of taxes, duties and other payments related Comments: to National Public Budget. Those audits are not allowed anymore for tax periods until 1 January 2018. Therefore, the amounts calculated within the audit were significantly reduced. IN00829576 ►DLI: Improved the usability of the STS website. (Text, Custom, PBC) Baseline Actual (Previous) Actual (Current) End Target There are two websites available (one for information only and another one for the New STS website is submission of tax Value n/a in progress used by the taxpayers declarations by taxpayers); there are some gaps in the functionality of both websites. Date 31-Dec-2018 10-Sep-2019 31-Mar-2020 31-Dec-2020 The STS is in progress of selecting a firm to develop the single website. As of March 31, 2020 the STS Comments: has not shortlisted the received expression of interest application. To improve taxpayer services IN00829572 ►Time required to comply with taxes (Hours, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 186.00 181.00 181.00 165.00 Date 31-Dec-2015 01-Jul-2019 31-Dec-2019 30-Nov-2023 The target level of 180 set for 2019 was not achieved. The STS explained that according to the Law # 178 of 26.07.2018 the taxpayers had to comply with the new rates of social assurance contributions for Comments: the period until October 1, 2018 and after, thus adjusting the declarations submitted influenced on the time needed to comply. IN00829574 ►DLI: Strengthened the capacity of STS staff to deliver taxpayer services (Text, Custom, PBC) Baseline Actual (Previous) Actual (Current) End Target There is no a Manual on The Manual is Taxpayer Services, the Value n/a DLR1 is achieved implemented and all staff had no specific eligible staff of STS trainings. 5/14/2020 Page 4 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) located in all offices was trained Date 31-Dec-2018 10-Sep-2019 31-Mar-2020 31-Dec-2020 DLI 4 has two Disbursement Linked Results (DLRs). The DLR 4.1 has been achieved. The STS approved the developed Manual on Taxpayer Services by its Order # dated January 27, 2020. Comments: The disbursement against achieved DLR 4.1. amounting 110 000 SDR ( USD 149,700.10) has been made on March 26, 2020. IN00829577 ►DLI: Introduced an Electronic Taxpayer Survey Tool (Text, Custom, PBC) Baseline Actual (Previous) Actual (Current) End Target The tool is No tool for taxpayers’ implemented. Value regular feedback is in n/a Delay place. Date 31-Dec-2018 10-Sep-2019 31-Mar-2019 30-Dec-2020 This DLI is aimed at reflecting STS`s efforts to improve its taxpayer services under the RBF Component. DLI 5 has two Disbursement Linked Results (DLRs). Comments: DLR 5.1. on piloting of electronic taxpayer survey tool mechanism, staff training and launch of roll-out sheduled for end December 2019 has not yet started. Overall Comments PDO The Borrower is progressing with several DLIs. One DLI 2 on improving the tax collection has been fully achieved. At the same time, 2 out of 5 Disbursement linked results (DLR) planned for the end 2019 were achieved, while 2 others are in progress. Also, the first DLR under DLI 2, planned for end 2020 is already completed. Intermediate Results Indicators by Components Institutional development IN00829579 ►Taxpayer satisfaction (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Satisfaction in crease - 20% (compared to baseline) Baseline survey Baseline survey conducted. The conducted. The baseline Final survey baseline is identified Legal entities -76,3% and is identified as of conducted with data as of December 31, Value Individuals – 69,2%. December 31, 2018. disaggregated by 2018. Survey results Survey results were gender. Results and were published on published on STS suggested actions of STS website in May website in May 2019. the STS to address 2019. weaknesses are published on the STS website. Date 31-Dec-2018 01-Jul-2019 31-Dec-2019 30-Nov-2023 5/14/2020 Page 5 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) The survey on the assessment of the taxpayers' satisfaction with the services provided by the State Tax Service was finalized in December 2018 and its results were published on the STS website in May 2019. Satisfaction assessment baseline was determined: 76,33% - legal entities and 69,15% - individuals. Comments: According to the project's PAD, the next survey will be conducted in May 2021. IN00829581 ►The Training Distance Learning System for the most important workflows developed (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target All identified distance learning courses to 4 identified training 10 identified training The list of training support for the most Value programs were programs were programs is not identified important workflows developed. developed. are developed and updated. Date 31-Dec-2015 01-Jul-2019 31-Mar-2020 30-Nov-2023 Achievement of this indicator will be fully assisted by SIDA whose program includes support in improving methodologies for estimating and assessing the training needs; and the development of an automated information system in order to develop and improve the career development of e-learning platform. US Treasury Advisor provides support in development of specific courses on arrears management, taxpayer services and tax control. The identified training programs are developed by STS, including 2 training programs which were Comments: developed with US Treasury support. The name of the indicator was specified as a result of project restructuring: The training distance learning system for the most important workflows developed. The ongoing SIDA Institutional Cooperation Project (2018-2021) will fully support the achievement of the initially planned indicator. However, TAMP supported the purchasing of 45video- conferencing equipment items to be used for distance learning of the STS employees across the whole country. IN00829582 ►Number of hits to the STS web-site (Number (Thousand), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 3,570,004.00 7,831,747.00 6,944,853.00 7,150,000.00 Date 31-Dec-2015 01-Jul-2019 31-Dec-2019 30-Nov-2023 The target for 2019 (6,9 mln) was achieved. Currently, the report includes total number of hits from STS`s two web-sites: www.sfs.md & www.servicii.fisc.md. Once a single web-site is introduced, the reporting will be based on hits to the single Comments: STS`s web-site. RBF: Support in tax policy and tax administration reforms IN00829580 ►Decrease in tax arrears (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 8.50 8.30 3.58 6.47 Date 02-Jan-2017 01-Jul-2019 31-Dec-2019 30-Nov-2023 Comments: the target level for 2019 was achieved. 5/14/2020 Page 6 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) Tax arrears at the end of 2019 were 1 399,73 mil MDL (including fines and penalties); tax revenues collected during 2019 - 39 135, 05 mln. MDL. Performance-Based Conditions IN00829583 ►PBC 1 DLI: Increased nominal value of the Specific and Minimal Excise Rates for all tobacco products under tariff position 240220 (Text, Outcome, 700,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) December 2021 Specific rates and minimum excise rates by types of Value tobacco products as set up n/a n/a -- in the Tax Code of Moldova in 2017 Date -- 10-Sep-2019 31-Mar-2020 -- IN00829584 ►PBC 2 DLI: Ensured that supplies of goods by insolvent subjects have been taxed with VAT on the reverse charge principle. (Text, Outcome, 650,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) December 2021 Due to the legal gap in provisions which stipulates the process of debt cancellation, at the time Value n/a n/a -- transfer of collected VAT insolvent subject does not have liquidity and this creates budget losses. Date -- 10-Sep-2019 31-Mar-2020 -- IN00829585 ►PBC 3 DLI: Improved the usability of the STS website. (Text, Output, 600,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) December 2021 There are two websites available (one for information only and another one for the Value submission of tax n/a in progress -- declarations by taxpayers); there are some gaps in the functionality of both websites. 5/14/2020 Page 7 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) Date -- 10-Sep-2019 31-Mar-2020 -- IN00829586 ►PBC 4 DLI: Strengthened the capacity of STS staff to deliver taxpayer services (Text, Output, 300,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) December 2021 There is no a Manual on Taxpayer Services, the Value n/a DLR1 is achieved -- staff had no specific trainings. Date -- 10-Sep-2019 31-Mar-2020 -- IN00829587 ►PBC 5 DLI: Introduced an Electronic Taxpayer Survey Tool (Text, Output, 750,000.00, 0.00%) Baseline Actual (Previous) Actual (Current) December 2021 No tool for taxpayers’ Value regular feedback is in n/a delay -- place. Date -- 10-Sep-2019 31-Mar-2019 -- Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P127734 IBRD-86250 Effective USD 12.58 12.58 0.00 0.00 0.00 0% P127734 IDA-58290 Effective USD 7.42 7.42 0.00 1.91 5.34 26% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P127734 IBRD-86250 Effective 06-Jun-2016 28-Jun-2016 25-Jan-2017 31-Dec-2021 30-Nov-2023 P127734 IDA-58290 Effective 06-Jun-2016 28-Jun-2016 25-Jan-2017 31-Dec-2021 30-Nov-2023 Cumulative Disbursements 5/14/2020 Page 8 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) PBC Disbursement Achievement Disbursed amount in Disbursement % PBC ID PBC Type Description Coc PBC Amount Status Coc for PBC Restructuring History Level 2 Approved on 05-Jun-2019 Related Project(s) There are no related projects. 5/14/2020 Page 9 of 9