01.05 Tax administration/1

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1 01.05 Tax Administration 1. Basic Information 1.1 Desiree Number: PL Title: Tax Administration 1.3 Sector: Finance - Twinning code: PL2000/IB/FI Location: Poland 2. Objectives 2.1 Wider objective: Strengthening of the tax administration through improvement of IT systems, further adjustment of the taxation system to EU requirements with particular emphasis on changes needed as a result of abolition of customs borders between Poland and EU Member States, and improvement of tax enforcement. 2.2 Immediate objectives: Adjustment of the Polish tax administration IT system POLTAX to be compatible with the EU systems. Ability to implement European Community Council Regulation No. 218/92/EEC. Adjustment of Polish excise regulations to EU laws. 2.3 Accession Partnership and NPAA priority: Strengthening of the tax administration and harmonisation of regulations on indirect taxes, i.e. VAT and excise tax, were set out in the Accession Partnership among its short-term priorities (strengthening of the institutional and administrative capacity in taxation) and medium-term priorities (improvement in tax enforcement, reform of customs and tax administration) in order to ensure the application of acquis. The tasks related to the implementation of this project are defined also in Chapter TAXATION of the NPAA. The following main directions of activities have been identified: Harmonisation of tax laws with those of the EU regarding indirect taxation (Item ). Strengthening of the tax administration (Item ). 3. Description 3.1 Background and justification: The project is a continuation of the activities in the area of taxation and tax administration related to Poland s accession to the European Union. Within these activities it is necessary to: 1. Introduce changes and additions in the IT system of the Polish tax administration in order to meet the EU requirements for its integration with IT systems of Member States. 2. Implement the provisions of Regulation No. 77/799/EEC dated 19 December 1997 and Council Directive No. 218/92/EEC which require Member States to exchange information on transactions concluded between VAT taxpayers in various EU Member States. 3. Adjust the Polish excise laws to the EU regulations, including: a) full adjustment of the Polish excise laws to the Community Council Directives on excise duty (92/12/EEC and 92/108/EEC). b) full adjustment of the accompanying administrative documents in the carriage of excise goods (2719/92/EEC and 3649/92/EEC). c) establishment and full implementation of the registration system of taxpayers operating tax warehouses for excise goods (SEED system) Tax administration/1

2 3.2 Linked activities: This Phare 2000 project is linked to Phare projects implemented by the Ministry of Finance in previous years and is a continuation of the following projects: 1. Phare99 project titled Improved Tax Administration. 2. Phare94; contract PL within the scope of VAT (two expert appraisements were prepared : VAT in the agricultural sector and VAT in the public utility institutions at the local and national level). 3. Phare94; contract PL : Study on capital gains tax and depreciation for tax purposes completed in Phare94; contract PL : Drafting of bills pertaining to personal and corporate income tax providing for the European Union directives completed in In 1994, the Ministry of Finance initiated work on tax administration Human Resources Development Project (Phare project ref ). This project is the basic element of numerous actions in co-operation with international organisations within the scope of the tax system reform and improvement of the tax administration s organisation. As part of the subject discussed in this paper, the following tasks deserve to be mentioned, namely: World Bank. A preliminary report on condition and directions of the tax administration reform has been prepared by the World Bank experts. It was prepared in consequence of a consultation and a seminar organised in Warsaw in June of Implementation and financing of training relating to use of Oracle environment for the Ministry of Finance employees are at their final stage (will be financed by the so-called Japanese grant). International Monetary Fund. The IMF and World Bank mission prepared a joint report on a review of the general strategy and the programme of work on tax administration reform titled Strategic priorities of the tax administration. Other actions In bilateral contacts, consultations are held with a group of US experts as part of the Poznan pilot programme. A regular adviser on tax administration issues (resident) was appointed in the Ministry of Finance. The Polish-Swedish co-operation is continued in the field of parallel tax administration, making execution proceedings more efficient, improvement of work methods for designing and implementation of computer programs as well as electronic data interchange. 3.3 Results: 1. A continuous information exchange between the POLTAX system and EU systems. 2. Specific information necessary to develop excise regulations and documents operating in the new tax system. 3. Introduction of a proper registration system of excise taxpayers and the exchange of information in this scope. 4. Provision of training for the finance ministry staff in tax law revision related to accession to the EU. 3.4 Activities: Contract 1: Twinning Establishment of CLO (Central Liaison Office): 1. Long term twinning expert (PAA) to advise on the establishment of CLO. The Preaccession adviser will be responsible for the co-ordination of work regarding the establishment of CLO. He or she should speak English, possess some knowledge and experience of Polish tax administration, possess at least 10 years of experience in the area of taxes and have practical knowledge in application of Regulation 218/92/EEC. Timing: July December Experts opinion on necessary changes to adjust Polish law to Regulation 218/92/EEC. Timing: October-December Development of taxpayers information strategy to inform them about obligations arising from Regulation 218/92/EEC. Timing: January-March Launch of the information campaign for taxpayers. Timing: June-December Preparation of training materials. Timing: October-December Tax administration/2

3 6. Provision of training for tax administration and CLO staff. Timing: May-December Printing of training materials (to be paid by the Polish side). Timing: January-April Translations (materials, lectures; to be paid by the Polish side). Timing: January-December Preparatory workshops of study visits. Timing: June Study visits on the functioning of CLOs in the EU Member States. Timing: July-September 2002 Adjustment of the Polish tax administration IT system to be compatible with the EU systems: 1. Assistance of long-term experts in project co-ordination and management. Timing: September 2001-December Training and equipment for training centres. Timing: October 2001-December Preparation of training materials and provision of training for tax administration staff. Timing: September 2001-December Printing training materials (to be paid by the Polish side). Timing: October 2002-December Translations (materials, lectures). Timing: October 2001-December Study visits, seminars, workshops on tax information exchange in EU. Timing: October March 2002 Harmonisation of excise laws: 1. Establishment of the excise duty database. Timing: April-December Expert s opinions rendered by EU specialists. Timing: February-December Study visits and consultations. February-June Translations (to be paid by the Polish side). Timing: February-September 2001 Contract 2: Technical equipment Purchase of the technical equipment for CLO. Timing: January-December 2002 Technical equipment, purchase and development of the POLTAX hardware base. Timing: January-March 2002 Purchase of hardware and software allowing the use of EU databases. Timing: July 2001-March 2002 Purchase of hardware and software for harmonisation of excise laws Timing: July-December Institutional Framework Target institutions: Ministry of Finance, Tax Chambers, Tax Offices, Fiscal Control Offices Responsible institution: Ministry of Finance Institutional development Poland s accession to the EU implies the need to adjust a number of regulations of the tax law to the standards and requirements imposed under the internal regulations applicable in the EU. As a result of project implementation, the IT system for the Polish tax administration will be developed and strengthened. Institutional and organisational framework will be prepared for the launch of CLO. The Ministry of Finance will become owner of the equipment. 5. Detailed Budget Contract 1 Twinning Investment Support Phare Support Institution Building Tax administration/3 Total Phare National Cofinancing IFI TOTAL Establishment of CLO Adjustment of POLTAX system to co-operate with EU systems Harmonisation of excise laws Contract

4 Technical equipment TOTAL The Polish authorities have assured that the Government cofinancing is available either through the reserve budget foreseen specifically by the Ministry of Finance for this purpose each year, or directly through the budget of the relevant Ministry 6. Implementation Arrangements 6.1 Implementation Agency PAO: P. Samecki, Undersecretary of State at the Office of the Committee for European Integration Al. Ujazdowskie 9, Warsaw. Tel.: , , FAX: , CFCU: Foundation Cooperation Fund, 6/12 Nowy Swiat St., Warsaw. The CFCU is responsible for handling tendering, contracting and payments of contracts on behalf of the Ministry of Finance which itself shall be responsible for preparing projects and managing their technical implementation. 6.2 Twinning: One twinning agreement is planned: Twinning in the matter of establishment of CLO and adjustment of the Polish tax administration IT system to be compatible with the EU systems. Long-term expert to oversee the establishment of CLO would play a role of PAA. The beneficiary of this project is the Ministry of Finance (Organisation of Tax Administration Department, Indirect Taxation Department, IT Department) as well as Tax Chambers and Tax Offices. Organisation of Tax Administration Department is responsible for establishment of CLO. Indirect Taxation Department is responsible for harmonisation of excise laws. IT Department is responsible for adjustment of POLTAX system to co-operate with EU systems. The implementing unit will be the CFCU. The Senior Programme Officer has the overall responsibility for the Project: Mr Waldemar Szumiel - Director of IT Department Ministry of Finance ul. Swietokrzyska 12 PL Warszawa tel. (+48 22) fax (+48 22) Non-standard aspects: n.a. 6.4 Contracts Two contracts are foreseen: Twinning agreement ( Euro) Purchase of the technical equipment ( Euro) 7. Implementation Schedule Adjustment of the Polish tax administration IT system to the EU systems: Start of tendering: September 2001 Start of project activity: January 2002 Completion: December 2002 Establishment of CLO: Start of tendering: July 2001 Start of project activity: January 2002 Completion: December 2002 Harmonisation of tax laws with those of the EU regarding indirect taxation: Start of tendering: February 2001 Start of project activity: February 2001 Completion: March Equal opportunity Approx. 75% of the staff of tax administration are women. Participation in the project is based only and exclusively on the qualifications and experience. 9. Conditionality and sequencing Tax administration/4

5 Sequencing: Implementation of the tasks related to the emergence of CLO and some tasks related to adjustment of the Polish tax administration IT system to be compatible with the EU systems depends on the establishment and commissioning of the wide area network and on the achievement of full operational capacity of the National Taxpayer Register (KEP). Both of those objectives are planned to be achieved at the beginning of the year Tax administration/5

6 01.05 Tax administration/6 Date of drafting: Dec. of 1999 Annex 1: Log-frame Planning Matrix for Programme Planning period: 1/1/ /12/2002 Programme number: Strengthening of the tax administration : improvement of IT systems, further adjustment of the tax system to EU requirements with emphasis on changes as a result of abolition of customs borders between Poland and EU Member States, improvement of tax enforcement. Programme title: TAX ADMINISTRATION Total budget: EURO 5,53 m Wider objective Indicators of achievement Sources of information Assumptions and risks Degree of institutional ability of the tax Progress reports on the implementation of administration to meet the European Union the Accession Partnership and NPAA. requirements in the tax sector. The aim of Poland s accession to the EU and implementation of the goal consisting of modernisation of tax administration. Immediate objectives Indicators of achievement Sources of information Assumptions and risks Adjustment of the Polish tax administration IT system POLTAX to be compatible with the EU systems. Ability to implement European Community Council Regulation No. 218/92/EEC. Adjustment of Polish excise regulations to EU laws. Degree of adjustment of the Polish tax administration IT system to co-operate with EU systems Established Central office responsible for co-operation with Member States in implementation of 218/92/EEC. Degree of removal of differences between Polish and EU excise regulation. Opinion of the EU and the Strategic Planning Group. Official publications. Ministry statistics. Approval of the Polish government for the accelerated modernisation of the tax system. Establishment of the legal framework by the parliament. Results of projects Indicators of achievement Sources of information Assumptions and risks Establishing permanent working contacts with the Subcommittee for IT Fiscalis (SCIT). Establishing a central register of Polish VAT taxpayers. Establishing a database on transactions by domestic entities with EU entities. Changes and additions in the POLTAX system allowing data exchange and/or integration with EU systems. Adapting POLTAX system to process financial data expressed in Euros. Establishing the legal framework to implement Regulation No. 218/92/EEC. Ensuring Polish entities with the Frequency of working contacts with the Subcommittee for Information Technology Fiscalis (SCIT). Progress in implementation of the central register of Polish VAT taxpayers. Progress in implementation of the database on transactions concluded between domestic and EU entities. Progress in the development of the POLTAX system in line with the planned objectives. Prepared revision of tax laws allowing for the implementation of ECC Regulation No. 218/92/EEC. NPAA progress reports. Official publications. Information bulletins. Ministry statistics. Periodical report on co-operation with the Subcommittee for Information Technology Fiscalis (SCIT). Periodical reports on task implementation. Information from tax offices. Establishment of a wide area network. Full operational capacity of National Taxpayer Register. Establishment of the legal framework by the Parliament. Provision of relevant funds to implement the project.

7 possibility to confirm validity of VAT identification numbers of their foreign contractors and ensuring the CLOs of member states with access to the Polish TIN database. Providing quarterly summaries of total value of deliveries between Polish entities and entities from EU countries; and of the total value of deliveries from each entity assigned a VAT identification number in Poland to each entity assigned a VAT identification number in another member state. Ensuring the possibility to provide each MS at its request with further information (invoice numbers, dates and value related to individual transactions between entities from relevant MS) and the possibility to request such information from MS. Ensuring comparison of quarterly sales summaries reported by Polish entities with the data obtained from the VIES system in order to prevent intra Community VAT frauds. Making VAT taxpayers familiar with the obligations related to the confirmation of intra Community movement of goods and services. Establishing a database of documents related to excise legislation in EU states. Adjusting fully Polish excise laws to the provisions of the Community Council Directive on Excise Tax. Adjusting fully accompanying administrative documents in the carriage of excise tax goods to the EU requirements. Establishing a registration system of taxpayers operating tax warehouses for excise goods (SEED system). Prepared quarterly declaration model forms. Prepared strategy of the information campaign. Higher level of services for taxpayers Tax administration/7

8 Inputs Study visits, seminars, workshops on VAT and excise taxes. Assistance of long-term experts in project co-ordination and management. Development of the strategy to inform taxpayers about new obligations. Preparation of the CLO organisational structure. Preparation of the training program for CLO staff. Preparation of training materials. Purchase of IT equipment for CLO purposes. Purchase of telecommunications equipment for the identification number confirmation unit. Study visits, seminars, workshops on the exchange of tax information in EU. Strengthening and extension of the POLTAX system hardware base. Purchase and implementation of modern IT technologies and tools. Study visits, seminars, workshops, studies on IT. Preparation of studies and expert s opinions by EU specialists. Translation of selected expert s opinions, studies and regulations into Polish. Development of legislative proposals adjusting Polish excise laws to the EU law. Preparation and provision of training for tax administration staff in changes in excise tax regulations Tax administration/8

9 Annex 2 : Cumulative Implementation, Contracting and Disbursement Schedule Document Project card Section D 01 Version Programme title: PHARE 2000 PROJECT Date: Planning period: 1/1/ /12/2002 Budget allocation Tax Administration PLANNED I II III IV I II III IV I II II IV Cost estimate in thousand EUR I M P L E M E N T A T I O N DCI DCIR DCIR DCIR DCIR DCIR IR IR C O N T R A C T I N G D I S B U R S E M E N T D = design of project / C = tendering and contracting / I = contract implementation and payment / R = reports Tax administration/9