Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE TAX MODERNIZATION PROJECT TO THE REPUBLIC OF TANZANIA AUGUST 30, 2006 {DATE OF RESTRUCTURING} MARCH 23, 2011 Report No:
Regional Vice President: Country Director: Sector Manager / Director: Task Team Leader: Obiageli Katryn Ezekwesili John McIntire Michael J. Fuchs Sherri Ellen Archondo 2
Restructuring Restructuring Type: Level two Last modified on date : 03/23/2011 Status: Draft 1. Basic Information Project ID & Name P100314: TZ-Tax Modernization Project Country Tanzania Task Team Leader Sherri Ellen Archondo Sector Manager/Director Michael J. Fuchs Country Director John McIntire Original Board Approval Date 06/15/2006 Original Closing Date: 07/31/2009 Current Closing Date 03/31/2011 Proposed Closing Date [if applicable] 09/30/2011 EA Category C-Not Required Revised EA Category C-Not Required-Not Required EA Completion Date Revised EA Completion Date 2. Revised Financing Plan (US$m) Source Original Revised BORR 2.00 2.00 DANI 8.00 8.00 DFID 11.60 11.60 IDA 12.00 12.00 Total 33.60 33.60 3. Borrower Organization Department Location The United Republic of Tanzania Tanzania 4. Implementing Agency Organization Department Location Tanzania Revenue Authority Tanzania 3
5. Disbursement Estimates (US$m) Actual amount disbursed as of 03/21/2011 12.00 Fiscal Year Annual Cumulative 2011 0.00 12.00 Total 12.00 6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N Does the restructured projects trigger any new safeguard policies? If yes, please select from the checklist below and update ISDS accordingly before submitting the package. N 7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes The project development objective for TAP is to assist the GoT to increase tax revenues without increasing tax rates. The PDO for TMP-IDA is designed to reflect TRAs mission statement which is: "To be an effective and efficient Tax Administration, which promotes voluntary tax compliance by providing high quality service with fairness and integrity through competent and motivated staff". 7b. Revised Project Development Objectives/Outcomes [if applicable] N/A 4
TANZANIA TAX MODERNIZATION PROJECT P100314 CREDIT NO. 4190-TA Restructuring Paper 1. The closing date for the above-mentioned project will be extended from March 31, 2011 to September 30, 2011 to enable a number of contracts for the delivery of specific goods and services which have been procured, to be completed. This will be the second extension of the project. 2. The Project Development Objective of the TMP is to promote an effective and efficient tax administration that provides high quality customer services with fairness and integrity. Although revenue targets have not been met (93 percent), progress has been made with regard to the implementation of the customs modernization program; this has already resulted in tangible improvements in customs clearance times. Further reduction in clearance times are to be expected as a result of the implementation of the recommendations of the Time Release Study (TRS). A number of other major initiatives included in the TRA Corporate Plan aiming at increasing the efficiency of revenue collection and facilitating taxpayer compliance have been launched and are at the implementation stage. This includes the implementation of an enterprise-wide risk management system, the launch of the second large taxpayer perception survey, the installation of a forensic lab for tax investigations, and the preparatory work for establishment of an external whistleblower mechanism. 3. With the completion of the proposed activities, the remaining funds will be fully disbursed. TRA has indicated that it does not require additional funding at this time as DFID and AFRITEC have provided parallel funding through the basket fund. 4. The team has discussed and agreed with the Borrower the Implementation Action Plan that is feasible and realistic, and will enable a successful achievement of the Project Development Objectives within the proposed time-frame. Everything will be completed by end-august 2011. 5. There are no budget implications for supervision. There is adequate funding under the TMP until the end of 2010/11 fiscal year. Project and supervision of this single remaining activity does not require much additional time. 6. Preparation on the Implementation Completion Report should not be delayed and would still be completed within FY 2012. 7. All audits are current and unqualified 5
Project Development Objective Indicators ANNEX 1 Result Framework and Monitoring TANZANIA: Tax Modernization Project Total tax revenue collected by TRA (for domestic reveneu) as a percentage of its annual revenue target for:(i) Direct taxes(ii) Inidrect taxes 107 92 100 01-Jul-2008 30-Sep-2010 31-Mar-2011 Custom Indicator Text collection in financial year (FY) Reduce level of perceived corruption index 15.1% 24% (large tax payers) (from last ISM in April); 1 30% Custom Indicator Text the survey is only undertaken annually, should have info in November 2010 but it is not available. Average time taken to clear goods at: (a) DSM Port; and (b) Airports (a) At DSM Port: 14 daysmin.; (b) At Airports: 6 days. (a) At DSM Port: 13 days (b) At airports: 5 days Custom Indicator Text a) At DSM Port: 5 days (b) At Airports: 2 days
Increased percentage of taxpayers awareness on tax education programs 46% 94 60% Custom Indicator Text From Large taxpayer perception survey; new survey will be done by end 2010 (every two years) Increase in percentage of written enquiries attended to within seven days To be determined 100 90% Custom Indicator Text baseline in 2006 was 46% (needs to be input) Global Environmental Objective Indicators No results have been entered. Intermediate Results Indicators
Average number of days to identify stop-filers (Domestic Revenue) (i) Direct taxes; (ii) Inidrect taxes (i) 14 days; (ii) 5 days (i) 14 days (ii) 5days (i) 10 days; (ii) 5 days Custom Indicator Text no change; target is (i) 10 days and (ii) 5 days (Indirect has met target) (i) Number of TIN registered tax payers; (ii) Number of VAT registered taxpayers. (i) 288,680 taxpayers; (ii) 6,154 taxpayers TIN 635,756 vat 13,923 Custom Indicator Text Percentage of VAT refunds made within one month (DRD) 62% 69 90% Custom Indicator Text Refund payment efficiency has dropped both in LTD and DRD. In DRD the percentage of refunds made within a month (i) 891,950 taxpayers; (ii) 17,905 taxpayers 3
now is 70.7% compared to a 90% performance last FY Percentage of customs clearances made within 24 hours at: (i) DSM Port; (ii) Aiprorts (i) DSM Port 95% (ii) Airport 88% (i) DSM Port 53% (ii) Airport 87% (i) 99% (ii) 97% 30-Jun-2006 30-Sep-2010 28-Jun-2011 Custom Indicator Text Deterioration in customs clearances in both port and airport and well short of end of project target. It is important that TRA complete time release study. Amount of previous year s arrears collected to total amount of tax arrears at beginning of the year (Domestic Revenue Dept) (i) domestic revenue (i) 116% 57 (i) 65% 30-Jun-2006 31-Mar-2010 31-Mar-2011 Custom Indicator Text Average number of days to identify stop-filers (Large Taxpayers Dept) 5 days 3 3 days 4
Custom Indicator Text No change over last ISM Total revenue realized from audits as a percentage of revenue collected (domestic revenue department) 17% 5% 10% Custom Indicator Text last ISM was report as 12% but current documents indicate that it was actually 9%, (TRA Small & Medium Taxpayer Perception Survey Conducted in April 09) Note: The overall core indicator is not applicable to this project. 5
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