World Bank Approves Romania Revenue Administration Modernization
30 April 2013
Posted by: Author: Lorys Charalambous
Source: Lorys Charalambous (Tax-News.com, Cyprus)
The World Bank has approved a EUR70m Revenue Administration Modernization project for Romania, with the aim of improving tax collection, increasing tax compliance, and reducing the administrative burden on taxpayers.
According to the Bank, Romania's tax efficiency index is currently one of the lowest in EU countries, at 54% for VAT and 61% for social contributions respectively. During the period from 2004-07, the revenue-GDP ratio rose from 27.2% to 29.0%, and this modest gain dropped back to 27.23% in 2010. The World Bank's Doing Business Report 2013 notes that Romania has a large number of small taxpayers facing a complex tax regime, requiring the use of disproportionate resources by taxpayers and the National Agency for Fiscal Administration (NAFA).
NAFA will manage the implementation of the project. According to task team leader Bernard Myers: "NAFA has laid a solid foundation for the next generation of revenue administration reforms that will span the next five years. NAFA has decided that the next reforms will focus on fighting tax evasion, reducing the administrative burden on taxpayers, and increasing collection efficiency and the project is contributing to these goals." He added: "A modernized NAFA will be fair, taxpayer service-oriented, and effective in identifying tax evaders, and it will, as a result, reduce evasion. The restructuring of NAFA and the reengineering of business processes is vital to the Ministry of Public Finance's objective to increase revenue as a share of GDP."
The Bank adds that the project design has been informed by past work, including a recent World Bank functional review of the Ministry of Public Finance, as well as several International Monetary Fund diagnostic reports and various European Union studies. It is concerned with: institutional development; increasing operational effectiveness and efficiency; taxpayer services and corporate communication; and project coordination and management. The expected outcome is a "modern tax administration" with a "robust" self-service website, a call centre, and other means of providing service. The Bank argues that by minimizing the need for physical contact between taxpayer and NAFA staff, there will also be fewer opportunities for corruption.
The project is an important component of the Government's economic reform programme, particularly given continuing weak growth in Romania and the wider European environment. Also, investments in key government institutions are an important pre-condition for Romania to continue its convergence with the European Union.
The World Bank loan is a LIBOR-based Euro single currency IBRD Flexible Loan plus fixed spread, with 12-year maturity, including a five-year grace period, with level repayment pattern. The expected effectiveness date is October 2013.