The World Bank Implementation Status & Results Report Tax Administration Reform Project in Uzbekistan (P173001) Tax Administration Reform Project in Uzbekistan (P173001) EUROPE AND CENTRAL ASIA | Uzbekistan | Governance Global Practice | IBRD/IDA | Investment Project Financing | FY 2021 | Seq No: 5 | ARCHIVED on 18-Dec-2023 | ISR59037 | Implementing Agencies: Republic of Uzbekistan, State Tax Committee Key Dates Key Project Dates Bank Approval Date: 16-Jun-2021 Effectiveness Date: 06-Jun-2022 Planned Mid Term Review Date: 02-Dec-2024 Actual Mid-Term Review Date: Original Closing Date: 30-Jun-2026 Revised Closing Date: 30-Jun-2026 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) The development objective is to improve the operational efficiency and effectiveness of the State Tax Committee (STC) and increase voluntary compliance. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Automation of core tax administration business processes:(Cost $48.70 M) Reduction of the informal economy:(Cost $6.00 M) Strengthening HR and institutional capacity for tax administration and delivery:(Cost $3.30 M) Supporting Project Management:(Cost $2.00 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Satisfactory Overall Risk Rating Moderate Moderate Implementation Status and Key Decisions Over the last reporting period significant progress was registered across all three components. The signature of five contracts (valued at about $40 million) to purchase of equipment and software for the modernization of the Data Processing Center (component 1) will be finalized in December 2023. The Tax Committee (TC) conducted work and capacity building to strengthen the Compliance Risk Management (CRM) framework, promote voluntary compliance, and introduce measures to combat the informal economy (component 2). The TC will initiate a series of activities - derived from the component 2 roadmap and the HR Action Plan - to enhance compliance and reduce the informal economy (component 2) and enhance HR infrastructure (component 3). 12/18/2023 Page 1 of 10 The World Bank Implementation Status & Results Report Tax Administration Reform Project in Uzbekistan (P173001) Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance Moderate Moderate Moderate Macroeconomic Moderate Moderate Moderate Sector Strategies and Policies Moderate Moderate Moderate Technical Design of Project or Program Moderate Moderate Moderate Institutional Capacity for Implementation and High Moderate Moderate Sustainability Fiduciary Substantial Moderate Substantial Environment and Social Moderate Moderate Moderate Stakeholders Moderate Moderate Moderate Other Moderate Moderate Moderate Overall Substantial Moderate Moderate Results PDO Indicators by Objectives / Outcomes Improved Operational Efficiency IN01374693 ►Reduction of cost-of-collection ratio of STC (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 1.53 0.92 0.86 0.80 Date 30-Apr-2021 31-Oct-2022 08-Dec-2023 30-Jun-2026 For the timeframe of January-October 2023, actual tax revenues was 132,876.7 billion soums and actual expenses of the Tax Committee was 1,136.5 billion soums. The cost of collection was therefore for 10 Comments: months of 2023: 1,136.5 / 132,876.7 * 100% = 0.86% Improved Operational Effectiveness IN01374694 ►Reduction in VAT compliance gap (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target 12/18/2023 Page 2 of 10 The World Bank Implementation Status & Results Report Tax Administration Reform Project in Uzbekistan (P173001) Value 0.45 0.45 0.40 0.25 Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 Support provided by the Bank and IMF experts and the associated micro-simulation modeling, has roughly estimated the tax gap for the years 2020 to 2022. In 2020 the estimated potential VAT revenues was 68.3 billion versus an actual value of 38.4 billion, leading to a gap of 44%. In 2022, the potential VAT revenues Comments: was estimated at 87.7 billion and the actual collected was 52.2 billion leading to a VAT compliance gap of 40.5%. There are no data for a full year 2023 yet. Increased Voluntary Compliance IN01374695 ►Number of additional assessment cases resulting from tax audits to LTO taxpayers, as a percent of total LTO audit cases selected using the risk management framework (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 100.00 80.00 Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 During January-October 2023 timeframe, the number of audits conducted of large taxpayers using the risk analysis system was 26 audits. Decisions were made with the execution of acts on additional assessments only for 20 audits in the amount of 264.25 billion soums. For the remaining 6 audits, acts are in the process of registration and decisions are not drawn up yet. Hence, the total number of completed Comments: audits to date is 20 and additional assessments were made for all 20 cases. The indicator is thus 100%. Note that the data does not take into account audits within the framework of the voluntary termination of the activities of legal entities, audits within the framework of instituted criminal cases of taxpayers Intermediate Results Indicators by Components Automation of Core Tax Administration Business Processes IN01374701 ►IT infrastructure enhanced (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target (a) 8 software products developed (b) 7 software products and 5 services improved (c) 4 new services developed (mobile app) now reaching 22 Manuals for all Value n/a n/a in total modules of tax system (d) Integration with the developed IT systems of 15 government bodies (out of 34 in total) (e) Module for risk- based selection of audit cases designed and operational 12/18/2023 Page 3 of 10 The World Bank Implementation Status & Results Report Tax Administration Reform Project in Uzbekistan (P173001) (f) Module for Audit case management system designed, to become operational early 2024 Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 IN01374704 ►Coverage of electronic tax services (% total) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 60.00 65.00 65.00 90.00 Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 In accordance with the order of the Ministry of Justice of the Republic of Uzbekistan dated October 27, 2023 No. 3467, according to the Unified Register of State Services in the Tax Sphere, only 20 types of services provided are included, out of which 13 types of services are provided electronically, resulting in Comments: the level of digitalization of services in the tax field in the system Public services account for 65% STC, on its own, is digitizing other tax services. As of now, 51 types of services are provided electronically. IN01374707 ►Coverage of automated business processes (% total) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 50.00 55.00 55.00 90.00 Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 Based on the adopted list of business processes of the tax authorities, an assessment of the current state of automation was made. As a result of the assessment, the PIU determined that the level of current Comments: automation (digitalization) of business processes of the STC is 55.2%. Detailed information is provided in the progress report prepared by the PIU IN01374709 ►ICT customers (i.e., STC staff satisfaction rate) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 70.00 70.00 90.00 Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 The STC, as part of the preparation of the previous mission (May 2023), conducted a study through a survey among employees based on a questionnaire of 5 questions covering 2 thousand people. Analysis of the results showed an average level of satisfaction with the quality of the ICT system - 70%. The Comments: research was carried out taking into account the regional affiliation and specialization in the tax field of the respondents. This indicator is tracked annually and another survey is expected within 6 months IN01374712 ►Reduction in time to process VAT refunds (Days, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 60.00 60.00 14.00 30.00 12/18/2023 Page 4 of 10 The World Bank Implementation Status & Results Report Tax Administration Reform Project in Uzbekistan (P173001) Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 For the period January-October 2023, 29,108 applications were received from 15,600 companies for a VAT refund of 32,336.7 billion soums. About 70% of the cases were resolved in 10 days, 20% in 20 days Comments: and the remaining in 30 days maximum (as per applicable law). The weighted average is approximately 14 days. Address Tax Barriers to Reduce the Informal Economy IN01374702 ►Total stock of arrears as percentage of domestic tax revenues collected (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 4.00 7.70 6.30 5.00 Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 Based on data provided by the STS for the period of January-October 2023, total stock of arrears as percent of tax revenues was 6.3% (5232.5 / 83269.7 = 6.3%). The ratio for large taxpayers was 1.6%, Comments: (736.8/45646.7=1.6%) and for small taxpayers 11.9%. (4,495.7/37623=11.9%) IN01374705 ►Increase number of cases selected for audit using the risk-assessment framework (as a % of total audits/inspections) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 100.00 100.00 0.95 Date 30-Apr-2021 31-Oct-2022 08-Dec-2023 30-Jun-2026 In 2023 (January to October), all 746 cases selected for audit were identified through the risk-based selection framework. Out of the 746, there were 26 cases for large taxpayers. Hence the indicator is Comments: 100% IN01374710 ►Voluntary Compliance Enhanced (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target (a) Updated action plan to combat shadow economy (b) Cash back system implemented (as of Oct. 2023, 2.8 million users) (c) Online cash registers installed Multi-channel service Value n/a n/a covering 98% of delivery in full retailers operation. (d) E-invoicing volume reached 3.6 million per month (12% increase over 2022) (e) A risk-based selection of audit cases is automated and operational 12/18/2023 Page 5 of 10 The World Bank Implementation Status & Results Report Tax Administration Reform Project in Uzbekistan (P173001) (f) Automated cross- check of data / desk audit is operational Date 30-Apr-2021 31-Oct-2022 08-Dec-2023 30-Jun-2026 IN01374713 ►Number of registered and active VAT taxpayers (o/w large taxpayers) (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 81,112.00 175,727.00 194,602.00 97,335.00 Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 The number of new registered and active legal entities VAT taxpayers - in the period January-October 2023 - was 23,292. The number of registered and active individual VAT taxpayers - was 487. Thus the total number of new registered and active VAT payers was 23,779. The cumulative total of active VAT taxpayers as of November 1, 2023 is 194,602. This is divided between legal entities (192,059) and individuals (2,543). The number of registered large taxpayers is 1,631, out of which 1,586 taxpayers are active. Comments: Note for the last reporting period, the number of NEW active VAT taxpayers was 32,693 (30 of which were large taxpayers). Taxpayers are defined as active if they submit submit tax reports and having tax obligations, at least once a year. IN01374715 ►Overall taxpayers satisfaction with STC services, operations, and engagement (focusing on satisfaction rate on engagement) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 86.20 86.20 80.00 Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 The average performance score of 26 operators was rated by subscribers at 4.7 points. Studying the attitude of taxpayers to automation processes. survey was organized among taxpayers to study their opinions regarding the automation of the generation of tax reports. The survey was conducted with about 70,180 respondents (accepted as 100%). About 42.4% of respondents, or 29,744 taxpayers, support tax reporting automation processes, as this significantly reduces the time spent on report preparation. 43.8% Comments: of respondents or 30,752 taxpayers responded that this creates great convenience for them, taking into account the elimination of technical errors that arise in the reporting process. And only 13.8% of respondents or 9,684 taxpayers said that, despite the significant time investment, they prefer to prepare the report themselves, since they have enough manpower and time. IN01374717 ►Increase in tax revenues collected by STC (cummulative, bn som) (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 83,354.00 148,388.30 132,876.00 100,858.00 Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 Comments: Revenue forecast for the first 10 months of 2023 placed revenues at 131,511 billion soums. As of November 1, 2023, actual tax revenues collected was 132,876.7 billion soums (as forecasted), including for large taxpayers - 77,109 billion soums, from small taxpayers - 55,768 billion soums. Worth noting that tax/GDP increased from 18.6% in 2018 to 22.7% in 2022, despite the fact that the VAT tax rate was reduced in 2020 from 20% to 15%. 12/18/2023 Page 6 of 10 The World Bank Implementation Status & Results Report Tax Administration Reform Project in Uzbekistan (P173001) Strengthen HR and Institutional Capacity and Delivery IN01374703 ►HR infrastructure enhanced (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target (a) HR assessment and Action Plan finalized (b) Working Group on HR set-up Staff performance (c) HR department Value n/a n/a evaluation framework head appointed adopted. (November 2023) (d) Internal HR regulations prepared and placed on HRM platform Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 IN01374706 ►Share of women in managerial positions at STC in headquarters and the regional offices (% total managerial positions) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 1.40 4.80 5.60 7.00 Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 As of November 1, 2023, the number of management employees is 2,233, of which 125 positions are occupied by women or 5.6%. Breakdown of leadership positions of women managers: Advisor to the Comments: chairman - 1 unit, Head and deputy head of department - 4 units, Head and deputy head of the district tax inspectorate - 14 units, Head and deputy head of department - 106 units IN01374708 ►Capacity building program institutionalized (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target (a) A personnel training needs assessment was carried out Capacity building Value n/a n/a (b) Fiscal Institute program piloted. (operational for a couple of years) is institutionalizing capacity building Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 The Tax Committee determines the list of educational institutions for retraining and advanced training, the contingent of workers for advanced training, and approves plans for advanced training. In order to study the need for training courses, the effective organization of training courses based on the need, in February Comments: 2023 a social survey was conducted among tax authorities remotely through the resource docs.google.com. 4,319 tax officials took part in the survey. The questionnaire included the directions of the training courses and the number of students. Based on the results of the survey received, training 12/18/2023 Page 7 of 10 The World Bank Implementation Status & Results Report Tax Administration Reform Project in Uzbekistan (P173001) programs for medium-term advanced training courses were developed. In the 1st quarter of 2023, in order to ensure advanced training for tax system employees, a schedule of advanced training courses, the number of employees trained, programs and plans for advanced training courses were approved. Legislative basis - The procedure for advanced training of employees of tax authorities is carried out in accordance with the Laws of the Republic of Uzbekistan “On the State Tax Service”, “On Education”, Resolution of the President of the Republic of Uzbekistan “On the organization of the Fiscal Institute under the Tax Committee” dated November 4, 2020 No. PP- 4879, Regulations of the Tax Committee “On the procedure for improving the qualifications of tax service employees,” approved by Order of the Tax Committee No. 101 dated February 25, 2021. Advanced training of employees is carried out through training in retraining and advanced training courses. IN01374711 ►Staff just-in-time trained on tax functions (e.g., audit, arrear management, registration) and disaster risk management and business continuity - cummulative, 50% of which are female (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 3,473.00 814.00 120.00 Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 During 2022 there were trainings in 10 areas (Tax audit, tax services to business, management training for women in cadre reserve, etc.) and which were given to 3,473 of the STC staff. Out of 3,473 participants, 504 were women. Comments: In 2023 (as of November 1), a total of 814 STC staff received training provided by the Fiscal Institute, out of which 81 were women. The training seminars ranged between 30 and 60 hours. Staff who only received limited day-long training were excluded. IN01374714 50% of which are female staff just-in-time trained on tax functions (Number, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 504.00 81.00 60.00 Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 IN01374716 ►Tax Analysis Enhanced (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value n/a n/a (a) The Fiscal Institute Core team – (originally designed to composed of men and conduct tax analysis) women - trained and is now a training entrusted permanently center only with tax analysis. (b) The Consolidation and Analytical Department is conducting tax analysis (tax gap, revenue forecasting) (c) There is one expert in the Consolidation and Analytical Department that is using micro-simulation modeling to conduct core analysis (d) Annual VAT Tax Gaps analysis is 12/18/2023 Page 8 of 10 The World Bank Implementation Status & Results Report Tax Administration Reform Project in Uzbekistan (P173001) estimated annually using the model Date 30-Apr-2021 15-May-2023 08-Dec-2023 30-Jun-2026 Performance-Based Conditions Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P173001 IDA-69120 Effective USD 60.00 60.00 0.00 0.87 59.13 1.5% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P173001 IDA-69120 Effective 16-Jun-2021 18-Apr-2022 06-Jun-2022 30-Jun-2026 30-Jun-2026 Cumulative Disbursements 12/18/2023 Page 9 of 10 The World Bank Implementation Status & Results Report Tax Administration Reform Project in Uzbekistan (P173001) Restructuring History Level 2 Approved on 06-Feb-2023 Related Project(s) There are no related projects. 12/18/2023 Page 10 of 10