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: 6 | ARCHIVED on 08-Oct-2019 | ISR38457 | 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-Sep-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 Unsatisfactory ►Moderately Satisfactory Overall Implementation Progress (IP) ►Moderately Unsatisfactory ►Moderately Satisfactory Overall Risk Rating ►Substantial ►Substantial 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 10/8/2019 Page 1 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) 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, the Project restructuring has been completed. TAMP restructuring includes 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 the revision of the Results Framework (RF). The Government of Moldova co-signed Letters on Amendments to the Loan and Financial Agreements on August 2, 2019, and now these are subject to Parliamentary ratification. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance ►High ►Substantial ►High Macroeconomic ►High ►High ►Substantial Sector Strategies and Policies ►Substantial ►Substantial ►Substantial Technical Design of Project or Program ►Substantial ►Substantial ►Low Institutional Capacity for Implementation and Sustainability ►Substantial ►High ►Substantial Fiduciary ►Substantial ►Substantial ►Substantial Environment and Social ►Low ►Low ►Low Stakeholders ►Moderate ►High ►Substantial Other -- -- -- Overall ►Substantial ►Substantial ►Substantial Results PDO Indicators by Objectives / Outcomes To improve revenue collection IN00740798 ►Overall efficiency of VAT collection (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 52.30 49.60 51.34 54.70 Date 31-Dec-2015 31-Dec-2018 01-Jul-2019 31-Dec-2021 10/8/2019 Page 2 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) Data submitted for 3 months 2019, according to the available information published by the National Bureau of Statistics. Comments: The indicator is on track. IN00740898 ►DLI: Increased nominal value of the Specific and Minimal Excise Rates for all tobacco products under tariff position 240220 (Text, Custom, DLI) Baseline Actual (Previous) Actual (Current) End Target Specific rates and minimum excise rates by types of Increased specific rates Value tobacco products as set up in n/a n/a came into effect. the Tax Code of Moldova in 2017 Date 31-Dec-2018 29-Mar-2019 10-Sep-2019 03-Jan-2022 This is a new disbursement linked indicator (DLI 1) for the RBF Component resulted from Project restructuring. This DLI is aimed at reflecting the implementation of the tax policy reform actions supported by the RBF component. DLI 1 includes Comments: 3 disbursement linked results. Achievement of this DLI is expected to contribute to improving tax collection. The STS will report on this indicator once the restructured project becomes effective. IN00740901 ►DLI: Ensured that supplies of goods by insolvent subjects have been taxed with VAT on the reverse charge principle. (Text, Custom, DLI) Baseline Actual (Previous) Actual (Current) End Target Due to the legal gap in provisions which stipulates the process of debt The adopted changes to cancellation, at the time Value n/a n/a the Tax Code came into transfer of collected VAT effect. insolvent subject does not have liquidity and this creates budget losses. Date 31-Dec-2018 29-Mar-2019 10-Sep-2019 31-Dec-2020 This is a new Disbursement Linked Indicator (DLI 2) for the RBF Component introduced as a result of Project restructuring. This DLI 2 is aimed at reflecting the tax policy reform implementation under the RBF Component and shall Comments: contribute to improving revenue collection. DLI 2 has 2 disbursement linked results. The STS will report on this indicator once the restructured project becomes effective. To improve tax compliance IN00740799 ►Share of active taxpayers (legal entities) filing income declarations in total registered taxpayer (legal entities) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 19.35 0.00 83.90 90.00 Date 31-Dec-2015 31-Dec-2018 31-Dec-2018 30-Nov-2023 The income tax returns are submitted annually by the legal entities to the State Tax Service no later than March 25 of the Comments: year following the year of administration. Thus, the value of the indicator is presented for the year 2018. (115,972 tax returns filed 2018 / 138 251 active taxpayers) 10/8/2019 Page 3 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) As the result of Project restructuring the indicator has been clarified to focus on legal entities. Also, annual target levels have been revised upwards. The actual value indicated meets the pre-restructuring target. IN00740896 ►Increase in additional tax assessed per audit (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 8.70 8.70 34.00 Date 31-Dec-2015 31-Dec-2018 31-Dec-2018 30-Nov-2023 The target level for 2018 year ( +15%) was not achieved ( actual was +8.7%) due to legal changes. The target value for 2019 is + 21%, while actual value for the first semester of 2019 year was -10.87% due to the same reason. The Law no. 180 of 26.07.2018 On Voluntary Declaration and Tax Incentive significantly limited audits on the Comments: correctness of the calculation, declaration and payment of taxes, duties and other payments related to NPB. Those audits are not allowed anymore for tax periods until 1 January 2018. The annual targets are measured as % increase against the baseline. IN00740899 ►DLI: Improved the usability of the STS website. (Text, Custom, DLI) 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 used Value submission of tax declarations n/a n/a by the taxpayers by taxpayers); there are some gaps in the functionality of both websites. Date 31-Dec-2018 29-Mar-2019 10-Sep-2019 31-Dec-2020 This is a new Disbursement linked indicator (DLI 3) for the Results Based Financing Component. This DLI is aimed at reflecting STS`s efforts to improve compliance under the RBF Component. DLI 3 has two disbursement linked results. Comments: The STS will report on this DLI once the restructured project becomes effective. To improve taxpayer services IN00740800 ►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 31-Dec-2018 01-Jul-2019 30-Nov-2023 The target level for 2018 year was achieved. The annual target levels of the indicator have been adjusted during the project's restructuring to reflect the extension of the Comments: project's closing date. IN00740897 ►DLI: Strengthened the capacity of STS staff to deliver taxpayer services (Text, Custom, DLI) 10/8/2019 Page 4 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) Baseline Actual (Previous) Actual (Current) End Target The Manual is implemented and all There is no a Manual on eligible staff of STS Value Taxpayer Services, the staff n/a n/a located in all offices was had no specific trainings. trained Date 31-Dec-2018 29-Mar-2019 10-Sep-2019 31-Dec-2020 This is a new Disbursement linked indicator (DLI 4) for the Results Based Financing Component. This DLI is aimed at reflecting STS`s efforts in improving its taxpayer services under the RBF Component. DLI 4 has two Disbursement Linked Comments: Results. The STS will report on the indicator once the restructured project becomes effective. IN00740900 ►DLI: Introduced an Electronic Taxpayer Survey Tool (Text, Custom, DLI) Baseline Actual (Previous) Actual (Current) End Target The tool is implemented. No tool for taxpayers’ regular Value n/a n/a feedback is in place. Date 31-Dec-2018 29-Mar-2019 10-Sep-2019 30-Dec-2020 This is a new Disbursement linked indicator (DLI 5) for the Results Based Financing Component. This DLI is aimed at reflecting STS`s efforts to improve its taxpayer services under the RBF Component. DLI 5 has 2 Disbursement linked Comments: results. The STS will report on this indicator once the restructured project becomes effective. Overall Comments PDO As the result of Project restructuring the results framework has been revised to include new DLIs/DLRs for the RBF Component and update other results indicators (name or target levels). This ISR is based on the updated results framework. However, STS continues reporting based on the previous results framework since the Amendments to the Loan and Financing Agreements co-signed by the GoM on August 2, 2019 have not become effective yet (subject to Parliamentary`s ratification). Two DLIs reflect the MoF’s achievements in tax policy reform and three DLIs will measure the progress achieved by the STS in strengthening tax administration and institutional development. All proposed DLIs are scalable and verifiable. As an evidence of achievement of relevant DLRs the MoF will provide appropriate draft laws, final laws approved by the Parliament and links on the official publications of those documents to the Bank for verification. Intermediate Results Indicators by Components Institutional development IN00740902 ►Taxpayer satisfaction (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 10/8/2019 Page 5 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) Satisfaction in crease - 20% (compared to baseline) Baseline survey conducted. The baseline is Legal entities -76,3% and Baseline survey conducted. Final survey conducted identified as of December Value Individuals – 69,2%. The baseline is identified as with data disaggregated by 31, 2018. Survey results of December 31, 2018. gender. Results and were published on STS suggested actions of the website in May 2019. STS to address weaknesses are published on the STS website. Date 31-Dec-2018 01-Apr-2019 01-Jul-2019 30-Nov-2023 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 Comments: determined: 76,33% - legal entities and 69,15% - individuals. During the Project's restructuring annual target values have been adjusted to reflect the project extension. IN00740904 ►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 support The list of training programs The identified training 4 identified training Value for the most important is not identified programs are developed. programs were developed. workflows are developed and updated. Date 31-Dec-2015 31-Dec-2018 01-Jul-2019 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 developed with US Comments: 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. IN00740905 ►Number of hits to the STS web-site (Number (Thousand), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 3,570,004.00 6,851,424.00 7,831,747.00 7,150,000.00 Date 31-Dec-2015 31-Dec-2018 01-Jul-2019 30-Nov-2023 Comments: The new updated targets for 2018 as well as for 2019 were achieved. The current amount indicated the number of hits in the first semester 2019. 10/8/2019 Page 6 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) As the result of project restructuring, the annual target levels, including the end target, have been increased based on results achieved in 2018 and in view of project extension. Currently, the reporting on the indicator includes cumulative number of hits from STS`s two web-sites. Once a single web-site is introduced the reporting will be based on hits to the single STS`s web-site. RBF: Support in tax policy and tax administration reforms IN00740903 ►Decrease in tax arrears (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 8.50 6.70 8.30 6.47 Date 02-Jan-2017 31-Dec-2018 01-Jul-2019 30-Nov-2023 The annual target levels of the indicator have been adjusted during the project restructuring to reflect the project extension. Tax arrears at the end of June 2019 - 1 588,2 mil MDL (including fines and penalties); tax revenues collected during 1 Comments: Semester 2019 - 19 153,8 mln. MDL. Current value is above the updated targets for 2018 and 2019, while it meets the original targets for these years against which STS reported. Disbursement Linked Indicators IN00740906 ►DLI 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 Specific rates increase excise rates by types of tobacco Value n/a n/a came into effect. (DLR products as set up in the Tax 1.3) Code of Moldova in 2017 Date -- 29-Mar-2019 10-Sep-2019 -- IN00740907 ►DLI 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 Value the time transfer of collected n/a n/a -- VAT insolvent subject does not have liquidity and this creates budget losses. 10/8/2019 Page 7 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) Date -- 29-Mar-2019 10-Sep-2019 -- IN00740908 ►DLI 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 declarations n/a n/a -- by taxpayers); there are some gaps in the functionality of both websites. Date -- 29-Mar-2019 10-Sep-2019 -- IN00740909 ►DLI 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 Value Taxpayer Services, the staff had n/a n/a -- no specific trainings. Date -- 29-Mar-2019 10-Sep-2019 -- IN00740910 ►DLI 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’ regular Value n/a n/a -- feedback is in place. Date -- 29-Mar-2019 10-Sep-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 0.97 6.38 13% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date 10/8/2019 Page 8 of 9 The World Bank Implementation Status & Results Report Tax Administration Modernization Project (P127734) 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 Restructuring History Level 2 Approved on 05-Jun-2019 Related Project(s) There are no related projects. 10/8/2019 Page 9 of 9