The World Bank Tax Administration and Statistical System Modernization Project (P163711) Project Information Document (PID) Appraisal Stage | Date Prepared/Updated: 04-Jan-2020 | Report No: PIDA27526 Dec 04, 2019 Page 1 of 15 The World Bank Tax Administration and Statistical System Modernization Project (P163711) BASIC INFORMATION OPS_TABLE_BASIC_DATA A. Basic Project Data Country Project ID Project Name Parent Project ID (if any) Kyrgyz Republic P163711 Tax Administration and Statistical System Modernization Project Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) EUROPE AND CENTRAL ASIA 09-Dec-2019 28-Feb-2020 Governance Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Ministry of Finance State Tax Service, National Statistical Committee Proposed Development Objective(s) To improve effectiveness of tax collection and the national statistical system. Components Component 1. STS Institutional Development Component 2. STS Operational Development Component 3. NSC Institutional Development Component 4. NSC Data Development Component 5. Project Management PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 35.00 Total Financing 35.00 of which IBRD/IDA 35.00 Financing Gap 0.00 DETAILS -NewFinEnh1 World Bank Group Financing Dec 04, 2019 Page 2 of 15 The World Bank Tax Administration and Statistical System Modernization Project (P163711) International Development Association (IDA) 35.00 IDA Credit 17.50 IDA Grant 17.50 Environmental and Social Risk Classification Low Decision The review did authorize the team to appraise and negotiate Other Decision (as needed) B. Introduction and Context Country Context 1. The Kyrgyz Republic is a land-locked country, with a gross national income (GNI) per capita of US$ 1,220 and a population of 6.3 million in 2018.1 The country has considerable economic potential based on its natural resource endowments, including mineral reserves and possibilities for development of hydropower, agricultural production, and tourism. The Kyrgyz Republic is significantly more market-oriented and economically liberal than its Central Asian neighbors. Its geographic location coupled with the accession to the World Trade Organization (WTO) in 1998 and Eurasian Economic Union (EEU) in 2015 could potentially help attract significant investments from the immediate region. Currently, however, the country’s poverty headcount rate remains quite high: 22.4 percent of the country’s population live below the national poverty line, and a larger group above the poverty remain at risk of falling back into poverty. 2. Growth of Gross Domestic Product (GDP) in the Kyrgyz economy has averaged 4.5 percent per annum between 2000 and 2018 despite suboptimal fiscal performance and significant year-over-year volatility. Economic growth has been largely dependent on gold and remittances inflow. The Kyrgyz Republic’s remittances are amo ng the highest in the world, nearly 27 percent of GDP in 2018. Macro-fiscal policies have not facilitated increases in private investment. Following fiscal consolidation in 2001-2008, the government pursued fiscal expansion after 2009 to mitigate the social impact of external and internal shocks. This prompted the widening of fiscal deficits to 6.3 percent of GDP in 2016. Recent cuts in capital spending, coupled with increased revenue, reduced the fiscal deficit to 1.6 percent of GDP in 2018. Public debt sharply increased to 67.3 percent of GDP by 2015, but then declined to 56 percent of GDP in 2018, as the government delayed some foreign-financed investment projects. However, the economic situation of the Kyrgyz Republic remains vulnerable. 3. The geography and topography make the Kyrgyz Republic extremely susceptible to natural hazards. Available 1 Source: World Development Indicators. Dec 04, 2019 Page 3 of 15 The World Bank Tax Administration and Statistical System Modernization Project (P163711) data suggests that the economic loss from natural hazards is between 0.5 and 1.3 percent of annual GDP. The country experiences 3,000 to 5,000 earthquakes every year and has 5,000 potentially active landslide sites with more than 10,000 homes located in landslide-prone areas. As glaciers continue to melt due to rising temperatures, more intense flooding events in the wintertime (and reduced water flow in the summer) are expected. The Jalal�Abad, Osh, Batken, Chui, Issyk�Kul, and Talas regions face the highest risk of floods and mudflows. The increasing frequency of adverse conditions associated with climate change will exacerbate the Kyrgyz Republic’s vulnerability and reduce ability to manage extreme events unless the appropriate adaptation measures are put in place2. 4. The Government of the Kyrgyz Republic (GoKR) recognizes the importance of improving tax administration and modernizing the national statistical system in addressing economic and fiscal challenges. It views strengthening domestic resource mobilization as an integral part of its efforts to finance public expenditure priorities in infrastructure, education, health and social protection and support sustainability of public finances. The GoKR is also cognizant that to increase efficiency of public spending, it needs reliable and timely statistical information on service delivery by sector. Furthermore, the GoKR considers tax administration reform and enhancing capacity of the national statistical system as essential elements in improving the investment climate to support economic growth and private sector development. Lowering compliance costs for individual and business taxpayers, increasing equity in tax collections, as well as improving the transparency and quality of statistical information can facilitate private investment decisions and support business conditions conducive for economic growth and job creation. Sectoral and Institutional Context 5. The Kyrgyz Republic National Development Strategy for 2018-2040 (Vision 2040) identifies tax administration and statistical reforms as priority reform areas and emphasizes the need for timely and reliable data in advancing the country’s economic wellbeing, social welfare, governance and sustainability. As part of Vision 2040, the GoKR aims to reduce the share of the shadow economy and improve domestic resource mobilization to finance social and economic priorities. To achieve this objective, the GoKR’s Medium-Term Development Program “Unity, Trust, Creation� for 2018- 2022 (MTDP), which operationalizes the Vision 2040, seeks to comprehensively reform the country’s tax administration with a view to increasing the effectiveness of tax collection and lowering the compliance burden of taxpayers. Similarly, Vision 2040 emphasizes the pivotal role of digital transformation in the reform processes and sets out the compulsory inclusion of a digital agenda in all conceptual and strategic frameworks. Since data lies at the core of evidence-based policymaking and digitalization, the national statistical system must face the challenge of the digital transformation in data collection and processing. Vision 2040, furthermore, emphasizes the increased need for quality statistical data and analysis in several policy areas, ranging from healthcare to forests, biodiversity, and agriculture. Thus, the GoKR has demonstrated a strong commitment to reforming tax administration and national statistical systems by putting these reforms at the center of its reform agenda. 6. The State Tax Service (STS) developed, and the GoKR endorsed, a Strategy for Tax Administration Reform for 2019-2022. The Strategy is aligned with the GoKR’s Vision 2040 and the MTDP for 2018-2022 and aims to implement reforms that will improve STS effectiveness and efficiency and reduce the compliance burden for taxpayers. 7. The STS is responsible for administering and collecting direct and indirect taxes at the national level and the local level, as well as Value Added Tax (VAT) on goods and services traded within the EEU.3 The core taxes in the Kyrgyz 2 Source: The World Bank Climate Change Knowledge Portal (https://climateknowledgeportal.worldbank.org/country/kyrgyzstan/vulnerability) 3 VAT on goods and services traded with countries other than the EEU members is collected by the State Customs Service. Dec 04, 2019 Page 4 of 15 The World Bank Tax Administration and Statistical System Modernization Project (P163711) Republic accounted for 12.6 percent of GDP in 2018 and include VAT, Corporate Income Tax (CIT) and Personal Income Tax (PIT). In 2019 the GoKR transferred collection of contributions from the Social Fund to the STS. Tax reforms in the past have yielded substantial gains in revenue collection. Total tax revenue, excluding social security contributions, increased from 16 percent of GDP in 2005 to 20.6 percent in 2014. However, total tax revenue as a share of GDP has been below that level, except for 2018 (Table 1). Table 1. Kyrgyz Republic: Tax and Social Contribution Revenues in 2014 –2018 (in Nominal Values and As Share of GDP) 2014 2015 2016 2017 2018 Revenue Source KGS, % of KGS, % of KGS, % of KGS, % of KGS, % of millions GDP millions GDP millions GDP millions GDP millions GDP Total 104696.9 26.1 108754.3 25.2 120440.0 25.3 132102.9 24.9 147261.0 26.4 Corporate income tax 5708.5 1.4 5822.9 1.4 5701.5 1.2 6237.0 1.2 6972.7 1.3 (profit tax) Personal income tax 7133.4 1.8 7802.4 1.8 8552.0 1.8 9174.2 1.7 10005.3 1.8 Social security 22057.8 5.5 24099.1 5.6 26559.0 5.6 28735.0 5.4 30647.2 5.5 contributions Value added tax (VAT) 32663.4 8.2 33220.8 7.7 39297.0 8.2 45131.0 8.5 52786.2 9.5 Excises 6334.4 1.6 7756.9 1.8 9058.9 1.9 9506.5 1.8 10296.3 1.8 International trade taxes 13771.1 3.4 9684.3 2.2 13809.3 2.9 16492.9 3.1 18319.3 3.3 Other taxes 17028.3 4.2 20367.9 4.7 17462.3 3.7 16826.3 3.2 18234.0 3.3 Source: Ministry of Finance data 8. The 2016 Tax Administration Diagnostic Assessment (TADAT) carried out by the World Bank reports significant weaknesses in the Kyrgyz Republic’s tax administration system: outdated tax administration business processes coupled with a lack of full automation of core tax administration processes; an unstructured approach to compliance and institutional risk management; limited accuracy of key data in the taxpayer registration database; and limited rollout of e-filing. The STS lacks compliance risk management across key tax administration functions and proactive measures to ensure accurate reporting. Compliance risk management is limited to audits and does not prioritize risks by tax, compliance obligations and taxpayer segments. The STS does not have information on revenue losses because it does not apply any methods to estimate them from inaccurate reporting, such as estimation of a VAT gap, and there is no risk-based verification system in place for VAT refunds. The STS’s limited risk management practices lead to an inadequate focus on large taxpayers while significant resources are assigned to the assessment of small taxpayers and minor compliance matters. The STS conducted 6,593 field audits in 2018 which generated net taxes assessed per field audit in the amount of Kyrgyz som 1.7 million. At the same time, the STS carried out 2,366 desk audits which generated net assessed taxes per desk audit in the amount of Kyrgyz som 3.2 million. In addition, the assessment revealed that the STS lacks strategic focus, skills and tools to monitor tax compliance as well as the performance and accountability of tax administration. Dec 04, 2019 Page 5 of 15 The World Bank Tax Administration and Statistical System Modernization Project (P163711) 9. Ineffective tax administration operations also hamper the STS’s efforts in tackling the informal economy. The estimated size of the country’s shadow economy is 37 percent of GDP.4 Due to weak tax administration, the burden of taxation rests disproportionately on a small number of formal firms, in turn incentivizing informality. While the STS has improved some aspects of the interface with taxpayers, its predominantly outdated business processes continue to create an excessive compliance burden for individual and business taxpayers. According to the 2020 Doing Business report, the Kyrgyz Republic made paying taxes easier by implementing an online platform for filing and paying taxes. But tax compliance costs have remained high. The number of tax payments for businesses at 26 is significantly above the Europe and Central Asia (ECA) region average of 14.4 and the Organization of Economic Cooperation and Development (OECD) average of 10.3. Furthermore, it takes on average 220 hours to complete tax requirements in the Kyrgyz Republic, compared with the ECA Region average of 213.1 hours and the OECD average of 158.8 hours. Finally, the tax administration system in the Kyrgyz Republic lags significantly behind in processing refunds and handling audits, scoring 37.4 in the post-filing index, whereas the ECA average is 68.2, and the OECD average is 86.7. 10. Complex and outdated core business processes inhibit the STS from moving forward with modernization. As a result, the STS’ automation efforts have yielded limited efficiency gains and improvements in tax administration processes and the quality of taxpayer services. 11. The National Statistical Committee’s (NSC’s) Development Strategy for 2020-20245 is aligned with the GoKR’s Vision 2040 and envisions significant steps toward digitalization, greater utilization of administrative data, including data on tax revenues, based on the government systems interoperability, streamlining of the National Statistical System6 (NSS) institutional relations and settings, and improvements in statistical education. Vision 2040 promotes evidence-based policy making as a prerequisite to achieve the country’s economic and social development priorities. This requires improvement in economic and social policy making, which in turn depends on the overall quality and comprehensiveness of the underlying evidence-base. The NSS is not fully equipped to deliver the needed information in a timely manner to policy and decision makers. 12. The NSC has taken important steps for the NSS to become a fully-fledged system which collects, processes and disseminates social and economic data based on international standards. However, the development of the NSS is a continuous process, and at each stage of development, the system faces new challenges. With changes in the data ecosystems and introduction of new requirements, a data revolution process is taking place, initiating new challenges in data processing, transmission, and dissemination in an open, user-friendly manner. New players, such as private sector “big data� generators, come into the picture and modify the boundaries of official statistics. In addition, the need to measure progress towards the Sustainable Development Goals (SDGs) places new requirements on the NSS in data collection, processing and calculation of new indicators, adding to the challenges the Kyrgyz statistical system is already facing. 13. The World Bank’s newly released indicator -- Statistical Performance Index (SPI) – is 75.5 for Kyrgyz Republic in 2018 (Scale 0 – 100, 100 being the best score), which suggests the need for continued strengthening of the NSS. With respect to indicators of maturity (coverage and openness)7 of a national statistical system, the 2018/19 Open Data 4 Eurasian Development Bank (2019). Study of the Non-observed Economy in Kyrgyz Republic. 5 The strategy is under consideration and approval being drafted by the Statistical methodology council. An approval is expected to take place in December 2019. 6 NSS comprises official statistical activity between the NSC, producers of administrative data and users of statistical data. 7 In the Kyrgyz Republic, coverage scores are higher than openness scores, meaning that when data is made publicly available, it is often not made available in open formats, with open licensing, or with metadata. The Kyrgyz Republic’s coverage is 53 Dec 04, 2019 Page 6 of 15 The World Bank Tax Administration and Statistical System Modernization Project (P163711) Inventory (ODIN) ranks the Kyrgyz Republic at 70th place (out of 178 countries) with an overall score of 50 out of a maximum possible score of 100. The NSC also fails to release data of high granularity due to inefficient surveys and an outdated administrative data collection system. A lack of the needed data does not allow the government to use data for targeting the most vulnerable segments of population at rayon, city and rural self-government levels (local self- government or LSG). In addition, a lack of data granularity hampers implementation of SDGs and hinders the strategic principle of “no one left behind�, from being pursued. 14. The TASSMP will support far-reaching reforms of the NSC identified and initiated under the Kyrgyzstan Implementation of the National Strategy for Development of Statistics Project (KGSTAT). Restructuring and streamlining of the NSC at the center and in the regions is needed to support smoother and uninterrupted statistical operations. The NSC is lagging in the use of contemporary methods of data collection and application of current international standards and methodologies. It needs to revamp and introduce a unified data collection, transmission, processing, storage, and dissemination system by introducing new data IT systems. These systems will also support generation of higher data granularity needed to develop evidence-based policies at subnational and municipal levels. Comprehensive work by the NSC is also needed to obtain agreement within the Government and key data users on the outputs of the national statistical system, periodicity of indicators, and granularity of data required for decision-making and development of economic and social policy. 15. Moreover, as the new Law on Official Statistics8 has been approved, many associated decrees need to be modified, some of them could be dropped and new ones adopted. Further digitalization in data collection will require changes in the organizational structure of the NSC and NSS most likely to a two-level statistical system, by eliminating a layer which does not add value, improving the statistical system at the ground level, including for those who collect and compile statistics on municipalities, and strengthening the top level of the system, where the methodologies are developed and indicators are produced. 16. The successful implementation of the earlier KGSTAT project (P144874) supported by a grant from the World Bank gave a much-needed boost to the capacity of the national statistical system. Re-tooling of the NSS was initiated under this project, while the continuation and completion is envisioned under the TASSMP. 17. The GoKR has requested World Bank financing to support modernization of the tax administration and the national statistical system. It requested support for the STS reform program, focusing on concrete commitments, such as modernizing tax administration business processes, enhancing the IT infrastructure, and improving taxpayer services. The GoKR requested support for the NSC reform program that includes enhancement of processes and requirements of the NSS to modernize data collection, processing, storing, dissemination, and application for policy making, and improve the capacity of the cadre of the statistical system. C. Proposed Development Objective(s) 18. To improve effectiveness of tax collection and the national statistical system. compared to an openness score of 44. Openness scores and coverage scores are not independent because data availability and comprehensiveness are key factors in openness. ODIN scores indicate that data is published in nearly every category, except crime and justice statistics and energy use. Even when data is published, in many social and environmental categories, it is not disaggregated. On the other hand, openness of data is lacking in all categories, meaning that compliance with open data standards can be improved in all areas. 8 Law No. 82, dated July 8, 2019. Dec 04, 2019 Page 7 of 15 The World Bank Tax Administration and Statistical System Modernization Project (P163711) PDO Level Indicators 19. Key results indicators for improving effectiveness of tax collection and measuring improvements in the statistical system performance and its successful modernization include: (a) Reduced VAT gap; (b) Additional net taxes assessed per field audit; (c) Reduced time required to comply with tax requirements as reported in Doing Business; (d) Overall efficiency gain, i.e. reduced time between completion of data collection and release of key statistical indicators (such as GDP, Financial, External Trade, and Poverty and Income statistics) to the public; and (e) Openness of official statistical data across 21 data categories: ODIN Score. D. Project Description 20. The TASSMP supports institutional reforms and capacity building on tax administration and statistics that are anchored on Vision 2040’s digital agenda. It includes five components: STS Institutional Development; STS Operational Development; NSC Institutional Development; NSC Data Development; and Project Management. Areas of Project support on tax administration will involve creating a taxpayer friendly tax administration that provides high quality online services relying on IT-enabled risk-based enforcement of tax compliance enabling the STS to improve effectiveness of tax collection. Areas of support on statistics will focus on operationalization of the new Law on Official Statistics, the national statistical system’s progress toward digitalization, greater utilization of administrative data based on the government systems interoperability, streamlining of the system’s institutional relations and settings, improvements in statistical education, and an upgrade of the underlying IT hardware and software infrastructure. 21. Component 1. STS Institutional Development. This sub-component aims to reduce the compliance burden for taxpayers through improving the quality of existing services and new services provided by the STS based on international good practices. It will finance activities to improve taxpayers understanding of tax laws, procedures, and rights and obligations; enhance a contact (call) center to provide improved services to taxpayers; and strengthen external and internal communications. The modernization of the contact center in the STS will include among others upgrade of the software and equipment. This component will also finance kiosk queue management equipment for select higher volume tax offices. In addition, an outreach initiative will be implemented to inform taxpayers of the changes in the way the modernized STS operates and to provide assistance in using the new functionality that will be available to taxpayers in interacting with the STS (i.e. delivery channels, enhancements to the taxpayer cabinet, audit issues, etc.). The component will also focus on building capacity in four areas: strategic planning, human resource management (HRM), change management, and internal controls, including integrity initiatives. It will involve activities to strengthen the management process for the STS covering all organizational levels, including, accountability, monitoring, internal control, and information security management. It will also support expansion of the management information to be extracted from the current and enhanced tax administration information technology (IT) system and improve the monitoring system used to assess the performance of the STS. STS management capacity will also be strengthened through training on strategic management and planning techniques, accountability system, quality assurance and quality control, and internal control systems. This also includes developing and implementing a program for strengthening integrity to bring the internal control function up to international standards and implement a continuous training protocol on integrity requirements in addition to enhancement of the internal systems to monitor compliance. The sub-component will include a comprehensive review of HRM policies and expansion of workforce planning and Dec 04, 2019 Page 8 of 15 The World Bank Tax Administration and Statistical System Modernization Project (P163711) strategy to take into account the need for new competencies, the workforce composition by skills distribution and position in the organization as developed through the Business Process Reengineering (BPR) under Component 2. It will also involve updating of the STS training strategy to reflect new competencies and match the current and future needs of the STS as identified by the BPR recommendations. The STS training strategy for staff, including acquisition of equipment for the STS training centers will be implemented under this component as well. In addition, activities in this component will support the development and implementation of a change management strategy to ensure that all changes that take place in the STS are based on common understanding of the purpose of the change and put in place a coalition for reform within the STS. 22. Component 2. STS Operational Development. The component will support modernization of the STS operational functions towards increased effectiveness by implementing new streamlined business processes and enhancing the existing tax administration IT system. This component is the heart of tax administration reforms and will involve a comprehensive, deep and systematic BPR. The focus of this component is on supporting the transformation of the STS into a modern tax administration that is aligned with international good practices. It will strengthen STS operational efficiency and effectiveness with the introduction of international good practices into the following operational functions of the STS: (i) registration; (ii) return processing; (iii) enforcement; (iv) audit; (v) appeals process; and (vi) business analytics. The component will support adjustments to the legal framework to put in place the authorizing environment for the modernization of the STS. The activities in this component will use the BPR roadmap to implement the redesign of tax administration business processes. The component will also involve development of the STS staff capacity to effectively mine data for risk assessment to support tax compliance. In addition, this component will finance upgrading of the STS tax administration IT system (ISNAK), which will involve: (i) development of specifications for an enhanced IT system based on requirements identified in the BPR, carried out under this component, and in Component 1 of the Project; and (ii) the ISNAK upgrade implementation. The component will also support the associated staff training to ensure continued smooth operation and maintenance of the system, as well as further development of protocols and agreements to enable sharing of information between the STS and other government bodies and third parties through the existing Kyrgyz Tunduk information exchange system. 23. Component 3. NSC Institutional Development. This component will support the modernization of the NSS and the enhancement of human resources capacity in statistics. It will support reforms and changes in several areas: (i) review and drafting of the statistical system’s legal and regulatory framework to provide support for the implementation of the law on Official Statistics, as well as for coordination and communication within the NSS, i.e. between the NSC, producers of administrative data, and data users; (ii) modification of the institutional structure of the NSC at the center and the NSC units at the regional level by applying a Generic Activity Model for Statistical Organizations (GAMSO); and (iii) enhancement of business processes in the NSC and the national statistical system by introducing the Generic Statistical Business Process Model (GSBPM). This will require developing revised processes for each area of statistics to avoid duplication at different levels of the NSC and NSS. In addition, this component will support activities towards: (i) enhancing capacities of local universities to offer limited courses in official statistics in their programs to meet the skills needs of the NSC and other agencies; (ii) modernizing the NSC’s human resources management system to support further development of the NSS; and (iii) developing the capacity of the NSC Institute to apply international standards and methodologies in all areas of statistics in the Kyrgyz socio-economic setting. Moreover, the NSC program of human resource (HR) development and capacity building will pay attention to gender sensitive employment and training policies to reduce gender disparities among existing NSC staff and new staff hired during the lifetime of the TASSMP. 24. Component 4. NSC Data Development. This component will support the improvement of statistical infrastructure that will enable management of large data warehouses, collection of data via electronic means and secure transmission, storage, and dissemination of the data in open data formats. This component will include: (i) analyses and changes in the data collection process with a view to reducing the number of forms and indicators collected and thus reducing the Dec 04, 2019 Page 9 of 15 The World Bank Tax Administration and Statistical System Modernization Project (P163711) burden for respondents; (ii) improvements of the statistical databases and calculation methodologies in the main areas of statistics, including but not limited to: conversion and compilation of the national accounts using the 2008 System of National Accounts (SNA), improvement of collection and compilation of price statistics and data on foreign trade, in particular between countries of the EEU; further improvement in household survey statistics and calculation of poverty lines, including multidimensional poverty; and improvements and optimization of collection of other statistics, including through an increase and better use of administrative data; and (iii) enhancements in data dissemination in an open and user-friendly format, as well as capacity building in the NSC to analyze data and present it to users with metadata, basic manipulation tools, and explanations.9 The changes in data collection will involve a replacement of the total coverage collection with sample surveys and of paper questionnaires with electronic means of data collection. The component will also assist with introducing development of SDG indicators into the statistical practice and improvement of databases for their calculations. The NSC needs to plan the introduction and reporting of the indicators since the materials provided by the international custodian agencies may be difficult to understand and adopt to the local statistical practice. In addition, this component will support: (i) enhancement of the statistical infrastructure by updating statistical registers, linking with other government registers and using data from censuses to update registers, which will involve strengthening protocols of electronic data exchange with the registers of the STS, Ministry of Justice and other major data collection institutions (Ministry of Education, Ministry of Health, State Customs Service, Central Bank and other agencies); (ii) conduct of regular population, agricultural and industrial censuses, which will involve the formulation and modification of survey questionnaires and collection of responses electronically with the census materials being used to update registers and improve estimation of all social and economic indicators; (iii) facilitation of information exchange through the interagency information system “Tunduk�; (iv) improvement of municipal statistics, including continued work on digitalization of the Rural Household Register (RHR) and enhancement of the capacity of municipal civil servants responsible for collecting statistics at the Ayil Okmotu level (i.e. rural LSG); and (v) enhancement of technological capacity and physical infrastructure of the NSC to collect, process and store statistical reporting, survey and census data. 25. Component 5. Project Management. This component will finance costs associated with project management, including monitoring and evaluation and results assessment. There will be two Project Management Units (PMUs) — one at the STS and the other at the NSC, with some coordination required in areas such as Project progress reporting, consolidation of the Project budget and financial reporting, and disbursement applications. This component will finance national consultants to support procurement, financial management and technical implementation of the TASSMP, as well as operating costs associated with the TASSMP implementation and Project audits. It will also finance international consultants, on a part-time basis, to support project management and IT implementation. . . Legal Operational Policies Triggered? Projects on International Waterways OP 7.50 No Projects in Disputed Areas OP 7.60 No 9 Open data is not only a technical issue – it has its legal aspects, as well as requirement to improve timeliness and quality of data. In terms of requirements of Open Data dissemination, data presented in “PDF� or “Word� format may not be considered as op en. The NSC will be able to show data from other agencies and provide links to their websites; provide seminars, presentations to media, academia and businesses, explaining their products and raise awareness on how to read and understand statistics. Dec 04, 2019 Page 10 of 15 The World Bank Tax Administration and Statistical System Modernization Project (P163711) Summary of Assessment of Environmental and Social Risks and Impacts . The Project is a technical assistance project that will provide gains in efficiency within the government tax administration and the national statistical system. There are no civil works envisaged and the Project includes training of staff but does not anticipate any loss of employment. Therefore, no negative environmental or social impacts are expected and the corresponding risks are rated Low. E. Implementation 26. Institutional and Implementation Arrangements. The STS and the NSC will be responsible for the management and implementation of the TASSMP. The Project implementation arrangements will include a Project Management Unit (PMU) at each implementing agency. Both the STS and the NSC will initiate mechanisms for coordination across the government as needed to support implementation of TASSMP activities that require collaboration with ministries and other government agencies. The Project Operations Manual (POM) will be prepared to assist the project implementation. The POM will lay out the Project’s overall operating, fiduciary, and decision-making procedures and its results monitoring arrangements. 27. The STS and the NSC will carry out fiduciary functions, such as procurement and financial management, for activities under respective tax administration and statistical components of the Project with support of their respective PMUs that will be established. The fiduciary functions will include planning and budgeting, accounting, financial reporting, external auditing, preparation of disbursement (withdrawal) applications and submission to the World Bank, funds flow, and internal controls. Taking into consideration the NSC’s previous experience of implementing the Bank financed KGSTAT project, the NSC will be responsible for the consolidation of the TASSMP annual budget and its submission for approval through the state budgetary system, as well as the consolidation of the Project’s financial statements, based on inputs provided by the STS for its components. In addition, the NSC will be responsible for arranging audit for the overall Project. Annex 1 provides more details on institutional and implementation arrangements. 28. Implementation arrangements for the tax administration components of the TASSMP are designed to ensure cross-departmental coordination internally within the STS and externally with the Prime Minister’s Office and other stakeholders, covering external coordination and accountability, project management functions, and the management of specific Project activities. Implementation of Project activities supporting the modernization of the STS will require close coordination with other projects, both donor and state funded, in this area (i.e. the D-CASA project financed by the World Bank, the Government’s e-fiscalization initiative). 29. The STS will be responsible for the day-to-day management and implementation of the Project’s tax administration components. It will host the PMU for implementation of tax administration modernization activities financed by the TASSMP. A designated STS Deputy Chair will serve as a Project Coordinator, overseeing work of the STS PMU on a day-to-day basis. The Project Coordinator will serve as a focal point for communication with the World Bank team on Project related issues. 30. The Project Coordinator will be supported by a Project Manager who will head the STS PMU operations. The STS PMU will assist the STS with coordination of Project activities, contract management, monitoring and evaluation and reporting functions under the Project. Besides the Project Manager, the STS PMU will be staffed with full time procurement specialists, a financial manager, a disbursement specialist, a monitoring and evaluation specialist, and an office manager who will be responsible for administrative and interpretation services in addition to technical experts (change management adviser, project management adviser, IT adviser and other experts) on a part-time basis. The Dec 04, 2019 Page 11 of 15 The World Bank Tax Administration and Statistical System Modernization Project (P163711) Bank will provide additional training to PMU staff to ensure sufficient capacities to manage and implement the Project, including change management and meeting World Bank safeguards requirements. 31. The existing STS Senior Management Committee which is led by the STS Chairman and includes the senior management team will, as with other STS coordinating activities, ensure that activities are coordinated across functions and are not implemented in a fragmented manner. Technical Working Groups (TWGs) within the STS will be established, as required, to provide technical inputs and supervision for the day-to-day implementation of Project activities under each component and subcomponent with the support of the PMU. The TWGs will be supporting and advising the PMU in drafting of Terms of Reference (ToRs) and technical specifications for bidding documents, participate in evaluating bidding proposals, and supervise the execution of consulting services in their respective areas as well as provide inputs to the PMU on results achieved in their area of responsibility. 32. Implementation arrangements for the statistical components of the TASSMP are designed similarly, i.e. to ensure cross-departmental coordination internally within the NSC and externally with the President and Prime Minister’s Offices and key government stakeholders responsible for high level policy and strategic direction. Coordination also must be done with ministries and agencies which report to and receive statistical information from the NSC for policymaking. Implementation of Project activities supporting the ongoing transformation of the NSC and the national statistical system will also require close coordination with other donor funded projects in this area. 33. The NSC will be responsible for the day-to-day management and implementation of the statistical components of the TASSMP. The PMU at the NSC will be set up to coordinate and support the overall implementation of the Project statistical components. The NSC PMU will report to the Project Coordinator appointed by the NSC Chairperson. The Project Coordinator will oversee day-to-day work of the PMU and will serve as the focal point with the World Bank and other project related issues. The PMU will also manage reporting and auditing activities and ensure compliance with the procurement, disbursement and financial management policies and procedures. The functions of this office will include expenditure management and monitoring and evaluation of the statistical components of the Project. The NSC PMU will comprise a Project Manager, a financial manager, two procurement specialists, a disbursement specialist, a monitoring and evaluation specialist, and an office manager who will provide administrative and interpretation services. 34. Important additional responsibilities of the NSC PMU will be preparation and submission of the Project’s annual budget consolidation for all components, based on inputs provided by the STS for its components, and submission for the approval through the state budgetary system. It will also consolidate the overall Project’s annual financial statements, based on inputs provided by the STS for its components, and arrange for the external audit of the Project. 35. Technical Working Groups, comprising members from the relevant NSC departments and statistics units of the relevant ministries and agencies, will be established to provide technical advice and expertise on issues related to implementation of the Project as well as provide inputs to the PMU on results achieved in their area of responsibility. The TWGs will report to the NSC Chairperson. Advice will also be sought from data user groups. 36. It is proposed to implement capacity building activities of the Project, particularly those requiring international consultants, through a twining partnership (TP). Experience from various statistical capacity building projects implemented in other countries, including the KGSTAT project implemented in the Kyrgyz Republic, showed that a TP between the NSC and a consortium comprised of private sector consultancies and statistical offices from good practice countries, provides for a higher quality and more sustainable approach than hiring several consulting firms or individual consultants. In the long-term this could allow building a lasting partnership between statistical agencies that will endure beyond the Project’s life. In addition, the greater use of private-public partnerships of statistical offices of developed countries and private consultancies through a twinning mechanism will help reduce the risk of implementation of capacity building projects that could be constrained by the lack of expertise and technical assistance. Dec 04, 2019 Page 12 of 15 The World Bank Tax Administration and Statistical System Modernization Project (P163711) Dec 04, 2019 Page 13 of 15 The World Bank Tax Administration and Statistical System Modernization Project (P163711) . CONTACT POINT World Bank Nataliya Biletska Senior Public Sector Specialist Saida Ismailakhunova Senior Economist Borrower/Client/Recipient Ministry of Finance Implementing Agencies State Tax Service Kabyl Abdaliev Chairman kabdaliev@sti.gov.kg National Statistical Committee Akylbek Sultanov Chairman nsc_mail@stat.kg FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects Dec 04, 2019 Page 14 of 15 The World Bank Tax Administration and Statistical System Modernization Project (P163711) APPROVAL Nataliya Biletska Task Team Leader(s): Saida Ismailakhunova Approved By Environmental and Social Standards Advisor: Practice Manager/Manager: Country Director: Bolormaa Amgaabazar 09-Jan-2020 Dec 04, 2019 Page 15 of 15