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: 4 | ARCHIVED on 04-Dec-2019 | ISR39194 | 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: -- 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 ►Substantial ►Substantial 12/4/2019 Page 1 of 7 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) Implementation Status and Key Decisions The Montenegro Tax Administration (MTA) is implementing the Revenue Administration Reform Project according to the Inception Report that was endorsed by the Steering Committee in March 2019. In addition, the restructuring and additional financing for EUR4.8 million to include a component to support the implementation of the electronic fiscal invoicing under the Project was approved by the Bank's Executive Board on October 10, 2019, signed on November 11, 2019, and declared effective on November 20, 2019. The first perception surveys on taxpayer's and MTA staff satisfaction on reforms being introduced were conducted between May-July 2019 to set the baseline values. According to the survey results, the taxpayers' perception of MTA's quality of services and staff integrity is high with 82% of respondents indicating satisfaction and 85% indicating that MTA performs its tasks efficiently. On the other hand, MTA staff satisfaction with new skills and ability to apply them was comparatively lower at 68%; and by gender, men appear to be more satisfied at 71% while women were somewhat less satisfied at 66%. The Project has yet to implement reforms on the ground. It is expected that this baseline survey will be discussed with the stakeholders and the subsequent annual exercises will help to inform the Project's implementation approach. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance ►Moderate ►Moderate ►Moderate Macroeconomic ►Substantial ►Substantial ►Substantial Sector Strategies and Policies ►Moderate ►Moderate ►Moderate Technical Design of Project or Program ►Substantial ►Substantial ►Substantial Institutional Capacity for Implementation and Sustainability ►Substantial ►High ►High Fiduciary ►Moderate ►Moderate ►Moderate Environment and Social ►Low ►Low ►Low Stakeholders ►Moderate ►Moderate ►Moderate Other -- -- -- Overall ►Substantial ►Substantial ►Substantial Results PDO Indicators by Objectives / Outcomes Improve effectiveness of operational functions of MTA IN00763190 ►Tax Gap for VAT (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 12/4/2019 Page 2 of 7 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) baseline to be established - VAT Gap Methodology 6% reduction in Tax Gap No methodology for Tax awaiting results from approved by MTA, Value for VAT compared to Gap for VAT estimation consultancy; proxy indicator baseline set at 9.81% using 2020 value value is 13.4 2017 data Date 01-Apr-2016 23-Apr-2019 22-Nov-2019 31-Dec-2022 VAT Gap Methodology was approved by MTA and baseline value set. Comments: IN00763242 ►Percentage of tax returns filed on time (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 84.32 for VAT (June 82 for VAT and 89 for CIT; 2019) and 92.36 for CIT no change from baseline as Value VAT: 82; CIT: 89 (Dec. 2018) - no VAT: 92; CIT: 96 per plan; no project activities significant project yet to influence change activities yet on the ground Date 31-Dec-2016 23-Apr-2019 22-Nov-2019 31-Dec-2022 No significant project activities yet to impact value of indicator. Comments: IN00763243 ►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 Exporters: 70% (2018); Rest: Exporters: 70% (2018); Value Exporters: 70%; Rest: 65% Exporters: 88%; Rest: 85% 65% (2018) Rest: 65% (2018) Date 31-Dec-2018 01-Jul-2019 22-Nov-2019 31-Dec-2022 No change in data; Update expected by end-2019. Project implementation on the ground has yet to take place. Comments: Reduce compliance costs for corporate taxpayers IN00763241 ►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 23-Apr-2019 22-Nov-2019 31-Dec-2022 Number of hours it takes to comply with tax and social security legislation based on Doing Business 2020 report. Same Comments: value as in Doing Business 2019. Intermediate Results Indicators by Components Institutional Development IN00763244 12/4/2019 Page 3 of 7 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) ►MTA staff satisfaction with the new skills and ability to apply them, disaggregated by gender (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Baseline survey consultancy for survey completed, 68% of MTA Increase by 10% compared Value No baseline methodology just started; staff respondents indicate to baseline established in baseline to be established satisfaction (men 71%, 2019 women 66%) Date 31-Dec-2016 23-Apr-2019 22-Nov-2019 31-Dec-2022 The results of the satisfaction surveys would now need to be discussed with stakeholders (MTA staff and management) to reflect on what needs to be adjusted with respect to the project's implementation approach. The difference in satisfaction Comments: level between genders also merits further consideration. IN00763248 ►Estimated tax gap is calculated annually and suitable for publication by year 5 (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Tax Gap Methodology Value No No Yes (with publication) approved by MTA Date 31-Mar-2016 23-Apr-2019 22-Nov-2019 31-Dec-2022 Consultancy for establishing methodology just initiated. Comments: Business Processes IN00763245 ►Payment compliance rate for VAT (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 62.00 62.00 59.00 87.00 Date 31-Dec-2016 23-Apr-2019 22-Nov-2019 31-Dec-2022 No project activities yet. Current value reflected is as of mid-year 2019. Previous data of 62% was for full-year 2018. Comments: IN00763249 ►Payment compliance rate for CIT (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 81.00 81.00 89.74 93.00 Date 31-Dec-2016 23-Apr-2019 22-Nov-2019 31-Dec-2022 Current value is for mid-year 2019 and is higher than end-year target but project activities have yet to be implemented. Comments: IN00763252 ►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 12/4/2019 Page 4 of 7 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) no comprehensive audit no comprehensive audits no comprehensive audits 75% of comprehensive Value centrally selected from risk centrally selected from risk centrally selected from risk audits selected centrally analysis system analysis system analysis system from risk analysis system Date 31-Dec-2018 01-Jul-2019 22-Nov-2019 31-Dec-2022 Project related activities have yet to be implemented. Comments: Taxpayer Services IN00763246 ►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 Increase by 10% compared Value No baseline consultancy just initiated with 82% of taxpayer to baseline established in respondents satisfied 2019 Date 31-Dec-2016 23-Apr-2019 22-Nov-2019 31-Dec-2022 Baseline survey completed. However, the respondents list does not allow for disaggregation of data by gender. Moreover, the results of the satisfaction surveys would now need to be discussed with stakeholders to reflect on what needs Comments: to be adjusted with respect to the project's implementation approach. IN00763250 ►Increased e-filing for VAT (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 75.00 75.00 75.00 95.00 Date 31-Dec-2018 01-Jul-2019 22-Nov-2019 31-Dec-2022 No change. Critical project activities have yet to be implemented. Comments: Electronic Fiscal Invoicing (EFI) IN00763247 ►Improved post filing index (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target increased by 8% from Value 70.49 70.49 70.50 baseline Date 31-Dec-2018 01-Jul-2019 22-Nov-2019 31-Dec-2022 Awaiting EFI implementation. Data from Doing Business 2020. Comments: IN00763251 ►Real-time information for VAT transactions available to MTA (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 12/4/2019 Page 5 of 7 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) EFI system available no real time EFI system in no real time EFI solution in no real time EFI solution Value 99.5% of the time for all place place in place transactions Date 31-Dec-2018 01-Jul-2019 22-Nov-2019 31-Dec-2022 Awaiting EFI implementation Comments: 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 0.78 14.98 4.9% Not P149743 IBRD-90130 USD 5.20 5.20 0.00 0.00 5.20 0% Effective 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 Not P149743 IBRD-90130 10-Oct-2019 11-Nov-2019 -- 31-Mar-2023 31-Mar-2023 Effective Cumulative Disbursements 12/4/2019 Page 6 of 7 The World Bank Implementation Status & Results Report Revenue Administration Reform Project (P149743) Restructuring History There has been no restructuring to date. Related Project(s) P170454-Additional Financing for the Montenegro Revenue Administration Reform Project 12/4/2019 Page 7 of 7