07.06.2016, 12:26
World Bank Approved USD 20 million in Financing for Tax Administration Project in Moldova
OREANDA-NEWS. The World Bank’s Board of Executive Directors approved US$20 million in financing for the Tax Administration Modernization Project in Moldova (US$7.42 million IDA credit and US$12.58 million IBRD loan).
The project will support the fundamental restructuring of the tax administration system, by implementing a centralized and unified tax system to improve revenue collection, tax compliance and taxpayer services. In recent years, Moldova has made substantial progress in reducing the time needed for paying taxes: according to the 2016 Doing Business report, in Moldova it takes 185 hours to prepare, file and pay taxes (about 21 payments per year) compared with, on average, 234.3 hours in the Europe and Central Asia region (20.5 payments per year) and 175.4 hours in OECD countries (11.8 payments per year).
This reduction in the workload for taxpayers has been brought about by the introduction of the “e-declaration” system, an online payment for some taxes, and the reduction in the number of declarations. Tax revenue collections, however, have shown a less positive trend. Revenue collections as a share of GDP have declined three years in a row, reaching a five-year low in 2014 at 30.2 percent of GDP. Poor performance is in large part a consequence of structural and capacity constraints in tax administration.
Moreover, taxpayer services are complicated by a lack of transparency on rules and procedures. Taxpayers see tax administration as inefficient and corrupt. 46 percent of businesses and 40 percent of household respondents to a 2015 Transparency International survey reported that informal payments are frequently needed to solve problems with tax inspectorates and estimated the total amount of bribes paid to the tax inspectorate by businesses in 2012 at 32.4 million lei ($2.54m).
Stakeholders from the business community, interviewed as part of the project identification, complained of a lack of transparency on tax issues, lack of clear guidance on tax policy and procedures, lack of clarity on rules and procedures for audits and appeals, and limited access to information on the appeals process as key issues contributing to increased governance risks in tax administration in Moldova.
The project will support the fundamental restructuring of the tax administration system, by implementing a centralized and unified tax system to improve revenue collection, tax compliance and taxpayer services. In recent years, Moldova has made substantial progress in reducing the time needed for paying taxes: according to the 2016 Doing Business report, in Moldova it takes 185 hours to prepare, file and pay taxes (about 21 payments per year) compared with, on average, 234.3 hours in the Europe and Central Asia region (20.5 payments per year) and 175.4 hours in OECD countries (11.8 payments per year).
This reduction in the workload for taxpayers has been brought about by the introduction of the “e-declaration” system, an online payment for some taxes, and the reduction in the number of declarations. Tax revenue collections, however, have shown a less positive trend. Revenue collections as a share of GDP have declined three years in a row, reaching a five-year low in 2014 at 30.2 percent of GDP. Poor performance is in large part a consequence of structural and capacity constraints in tax administration.
Moreover, taxpayer services are complicated by a lack of transparency on rules and procedures. Taxpayers see tax administration as inefficient and corrupt. 46 percent of businesses and 40 percent of household respondents to a 2015 Transparency International survey reported that informal payments are frequently needed to solve problems with tax inspectorates and estimated the total amount of bribes paid to the tax inspectorate by businesses in 2012 at 32.4 million lei ($2.54m).
Stakeholders from the business community, interviewed as part of the project identification, complained of a lack of transparency on tax issues, lack of clear guidance on tax policy and procedures, lack of clarity on rules and procedures for audits and appeals, and limited access to information on the appeals process as key issues contributing to increased governance risks in tax administration in Moldova.
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