The World Bank E-32 Agargaon, Sher-e-Bangla Nagar, Dhaka 1207, Bangladesh Phone: (880-2) 5566-7777 Facsimile: (880-2) 5566-7778 Mercy Tembon Country Director for Bangladesh and Bhutan December 14, 2020 Secretary Fatema Yasmin OFFICIAL Economic Relations Division DOCUMENTS Room No. 3, Block No. 8 Sher-e-Bangla Nagar Agargaon, Dhaka Dear Secretary Yasmin: Revenue Mobilization Program for Results: VAT Improvement Program (IDA Credit 5426-BD) Cancellation We refer to the Financing Agreement ("Financing Agreement") between the People's Republic of Bangladesh ("Recipient") and the International Development Association ("Association") dated December 7, 2014, as amended till date, for the financing of the Revenue Mobilization Program for Results: VAT Improvement Program ("Program"). We also refer to the letter received from the Recipient's Economic Relations Division, Ministry of Finance, dated November 17, 2020, requesting the Association after due consultations (i) for cancellation of SDR 9,934,380.50 from the proceeds of the Credit. In view of the foregoing, in accordance with the provisions of Section 6.01 of the International Development Association General Conditions for Credits and Grants dated July 31, 2010 applicable to the Financing Agreement, the Association hereby cancels as of November 17, 2020, an amount of SDR9,934,380.50. The withdrawal table set forth in Section IV.A.2 of Schedule 2 to the Financing Agreement has been revised accordingly and the revised withdrawal table is attached to this letter as Annexure I. The Program Action Plan set forth in Schedule 4 to the Financing Agreement has been revised and the revised Plan is attached to this letter as Annexure 11. Except as specifically amended by this letter, all other terms and conditions of the Financing Agreement shall remain in full force and effect. The Association will disclose this letter and related information on the Agreement in accordance with the Association's Policy on Access to Information. By entering into this letter, the Recipient consents to disclosure of this amendment letter and related information. Please confirm your agreement to the foregoing on behalf of the Recipient by countersigning and dating the form of confirmation set forth below, and returning one fully countersigned original of this amendment letter to us and retaining one original for your records. This letter shall become effective as of the date of the countersignature, upon receipt by the Association of the duly countersigned original of this letter except for the cancellation, which shall be effective from the date of the receipt of the request by the Recipient. Ms. Fatema Yasmin -2- December 14, 2020 Sincerely, INTERNATIONAL DEVELOPMENT ASSOCIATION Mercy Tembon Country Director for Bangladesh and Bhutan AGREED: PEOPLE'S REPUBLIC OF BANGLADESH By: Authoried Representative Name: Fatima Yasmin Economic Relations DivisIon Ministry of Finance Title: Gotfhpeopwde 4ser Date: 05. 01 . ZO21 Enclosures: Annex I - Revised Withdrawal Table Annex 2 - Program Action Plan cc: Mr. Abu Hena Md. Rahmatul Muneem, Chairman, National Board of Revenue & Senior Secretary, Internal Resources Division Mr. Abdur Rouf Talukder, Secretary, Ministry of Finance Dr. Pear Mohammad, Additional Secretary, Economic Relations Division Mr. Masud Sadiq, Member, VAT Policy, National Board of Revenue Ms. Zakia Sultana, Member, VAT Audit and Intelligence, National Board of Revenue Dr. Abdul Mannan Shikder, Member, VAT Implementation and IT, National Board of Revenue Mr. Kazi Mostafizur Rahman, Project Director, VAT Online Project, National Board of Revenue Mr. H. M. Shariful Hassan, Deputy Project Director, VAT Online Project, National Board of Revenue Dr. Delwar Hossain, Deputy Secretary, Economic Relations Division Mr. Rajesh Kumar Khullar, Executive Director for Bangladesh, The World Bank Mr. Mohammad Shafiul Alam, Alt. Executive Director for Bangladesh, World Bank Mr. Ritesh Kumar Singh, Senior Advisor to Executive Director for Bangladesh, The World Bank Ms. Fatema Yasmin -3- December 14, 2020 ANNEX I Attachment to the Association's Letter dated December 10, 2020 Credit Number 5426-BD Revised Withdrawal Table Amount of Financing Amount of Allocated to each the Disbursement Linked Financing Result (amounts Allocated to Disbursement expressed in SDR) each Linked Disbursement Linked Result Category Category Indicator (DLR) (expressed in (DLI)l SDR) 1. First DLI: DLR#1.2.1: Consultant has 3,250,000 upon 14,115,619.50 VAT signed a contract providing the achievement of DLR Implementation NBR with Program 1.2.1 on track management services DLR#1.2.2*: VAT registration 5,760,000 upon set-up by Year 2 (FY 2017-18) achievement of DLR 1.2.2 DLR#1.2.3*: VAT IT 4,480,000 upon collection system set-up by achievement of DLR Year 3 (FY 2017-18) 1.2.3 DLR#1.2.4: 25% of VAT 625,619.50 upon refunds system set-up by Year achievement of DLR 6 (FY 2020-21) 1.2.4 Formula: Subject to the Minimum Target achieved, FY Allocated Amount x [Actual Percentage Achievement/100 percent] less Amount disbursed previously under the relevant DLR for target met Provided that at least 40% of the work in respect of the individual DLR(s) are to be achieved before 'These DLIs are not time-bound. The Fiscal Years in which they are expected to be achieved as per this Schedule are strictly for indicative purposes. These DLIs can accordingly be met up and until the Closing Date, but in all cases subject to meeting the requirements set out in Section IV.B of Schedule 2 to this Agreement. * Scalable Ms. Fatema Yasmin -4- December 14, 2020 permitting partial disbursement under any individual DLR("Minimum Target")2 2. Second DLI: DLR#2.1: Baseline of active 960,000 upon 5,120,000 Number of registered VAT taxpayers for achievement of DLR# active VAT FY2015-16 established 2.1 taxpayers' ("Active Taxpayers Baseline") DLR#2.2*: 10 percent increase over the baseline by Year 2 (FY 960,000 upon 2017-18) achievement of DLR# 2.2 DLR#2.3*: 20 percent increase 1,600,000 upon over the baseline by Year 3 (FY achievement of DLR# 2018-19) 2.3 DLR#2.4*: 30 percent increase over the baseline by Year 4 (FY 1,600,000 upon 2019-20) achievement of DLR# 2.4 Formula- FY Allocated Amountx [Actual Achievement up to the relevant scalable DLR- Baseline]/[Target of the relevant scalable DLR - Baseline]+ undisbursed amount from previous targets met. 3. Third DLI: DLR#3.1*: 30% of large 1,600,000 upon 3,200,000 Percentage of taxpayers by Year 2 (FY 2017- achievement of DLR# large taxpayers 18) 3.1 as defined by the NBR,4 DLR#3.2*: 60% of large 1,600,000 upon submitting on- taxpayers by Year 3 (FY 2018- achievement of DLR# line returns and 19) 3.2 tax payments Formula: 53,333.33 for each percentage .__ The percentage completion will be determined by the number of pre-agreed items between the IT vendor and the NBR for implementation of the system as a proportion of the total number of items for each [DLR] which will be reported by the NBR. ' Active Taxpayer being a registered taxpayer who over the last year (12 consecutive months) has either filed VAT return or paid at least once. 4 "Large taxpayer list" is defined by a Committee of the NBR each year. Ms. Fatema Yasmin -5- December 14, 2020 increase in large taxpayers submitting on-line tax returns and tax payments 4. Fourth DLI: Combined with N.A N.A the third DLI 5. Fifth DLI: DLR#5.1: NBR public 1,220,000 upon 3,140,000 Greater disclosure of monthly VAT achievement of DLR# transparency of collection and refunds over a 5.1 the tax period of 12 consecutive administration months. by Year 2 (FY 2017- 18) DLR#5.2: VAT satisfaction survey carried out and results 960,000 upon published on the NBR website achievement of DLR# by Year 3 (FY 2018-19) 5.2 DLR#5.3*: In-house legal unit of NBR to respond to VAT appeals within 6 months on 960,000 upon average by Year 4 (FY 2019- achievement of DLR# 20) 5.3 Formula: Subject to the Minimum Target achieved, FY Allocated Amount x [Actual Percentage Achievement/100 percentl less Amount already disbursed under this DLR for target met. Provided that at least 40% of the DLR 5.3 is to be achieved before permitting partial disbursement ("Minimum Target") Government of the People's Republic of Bangladesh Ministry of Finance Economic Relations Division World Bank Branch-IV Shere Bangla Nagar, Dhaka-1207 www.erd.gov.bd Record Number: 09.00.0000.054.24.005.17.4 Date: 6/1/2021 Subject: Amendment to the Financing Agreement of Revenue Mobilization Program for Results: VAT Improvement Program (IDA Credit 5426-BD) (Fund Cancellation). Reference: 14 December 2020 World Bank's letter Dear Ms. Tembon, Please refer to your letter dated 14 December 2020 regarding counter- signing of the letter concerning Amendment to the Financing Agreement of Revenue Mobilization Program for Results: VAT Improvement Program (IDA Credit 5426-BD). I am pleased to inform you that the amendment letter has been duly signed by the concerned authority of the Government of Bangladesh. One original counter-signed set of the amendment letter is forwarded herewith for necessary action and records. Kindly acknowledge receipt of the aforementioned document. Your continuous support and cooperation are always appreciated. With best regards, Enclosure: Amendment Letter. Sincerely Yours, 6-1-2021 Dr. Delwar Hossain Deputy Secretary Ms. Mercy Tembon, Country Director Phone: 9180688 Email: wb4@erd.gov.bd Record Number: Date: 6/1/2021 09.00.0000.054.24.005.17.4/1(7) Copy for Kind Information and Necessary Action, 1) Senior Secretary, Internal Resources Division, Ministry of Finance, The World Bank E-32 Agargaon, Sher-e-Bangla Nagar, Dhaka 1207, Bangladesh Phone: (880-2) 5566-7777 Facsimile: (880-2) 5566-7778 Mercy Tembon Country Director for Bangladesh and Bhutan December 14, 2020 Secretary Fatema Yasmin Economic Relations Division Room No. 3, Block No. 8 Sher-e-Bangla Nagar Agargaon, Dhaka Dear Secretary Yasmin: Revenue Mobilization Program for Results: VAT Improvement Program (IDA Credit 5426-BD) Cancellation We refer to the Financing Agreement ("Financing Agreement") between the People's Republic of Bangladesh ("Recipient") and the International Development Association ("Association") dated December 7, 2014, as amended till date, for the financing of the Revenue Mobilization Program for Results: VAT Improvement Program ("Program"). We also refer to the letter received from the Recipient's Economic Relations Division, Ministry of Finance, dated November 17, 2020, requesting the Association after due consultations (i) for cancellation of SDR 9,934,380.50 from the proceeds of the Credit. In view of the foregoing, in accordance with the provisions of Section 6.01 of the International Development Association General Conditions for Credits and Grants dated July 31, 2010 applicable to the Financing Agreement, the Association hereby cancels as of November 17, 2020, an amount of SDR9,934,380.50. The withdrawal table set forth in Section IV.A.2 of Schedule 2 to the Financing Agreement has been revised accordingly and the revised withdrawal table is attached to this letter as Annexure I. The Program Action Plan set forth in Schedule 4 to the Financing Agreement has been revised and the revised Plan is attached to this letter as Annexure 11. Except as specifically amended by this letter, all other terms and conditions of the Financing Agreement shall remain in full force and effect. The Association will disclose this letter and related information on the Agreement in accordance with the Association's Policy on Access to Information. By entering into this letter, the Recipient consents to disclosure of this amendment letter and related information. Please confirm your agreement to the foregoing on behalf of the Recipient by countersigning and dating the form of confirmation set forth below, and returning one fully countersigned original of this amendment letter to us and retaining one original for your records. This letter shall become effective as of the date of the countersignature, upon receipt by the Association of the duly countersigned original of this letter except for the cancellation, which shall be effective from the date of the receipt of the request by the Recipient. Ms. Fatema Yasmin -2- December 14, 2020 Sincerely, INTERNATIONAL DEVELOPMENT ASSOCIATION Mercy Tembon Country Director for Bangladesh and Bhutan AGREED: PEOPLE'S REPUBLIC OF BANGLADESH By: Authoried Representative Name: Fatima Yasmin Economic Relations DivisIon Ministry of Finance Title: Gotfhpeopwde 4ser Date: 05. 01 . ZO21 Enclosures: Annex I - Revised Withdrawal Table Annex 2 - Program Action Plan cc: Mr. Abu Hena Md. Rahmatul Muneem, Chairman, National Board of Revenue & Senior Secretary, Internal Resources Division Mr. Abdur Rouf Talukder, Secretary, Ministry of Finance Dr. Pear Mohammad, Additional Secretary, Economic Relations Division Mr. Masud Sadiq, Member, VAT Policy, National Board of Revenue Ms. Zakia Sultana, Member, VAT Audit and Intelligence, National Board of Revenue Dr. Abdul Mannan Shikder, Member, VAT Implementation and IT, National Board of Revenue Mr. Kazi Mostafizur Rahman, Project Director, VAT Online Project, National Board of Revenue Mr. H. M. Shariful Hassan, Deputy Project Director, VAT Online Project, National Board of Revenue Dr. Delwar Hossain, Deputy Secretary, Economic Relations Division Mr. Rajesh Kumar Khullar, Executive Director for Bangladesh, The World Bank Mr. Mohammad Shafiul Alam, Alt. Executive Director for Bangladesh, World Bank Mr. Ritesh Kumar Singh, Senior Advisor to Executive Director for Bangladesh, The World Bank Ms. Fatema Yasmin -3- December 14, 2020 ANNEX I Attachment to the Association's Letter dated December 10, 2020 Credit Number 5426-BD Revised Withdrawal Table Amount of Financing Amount of Allocated to each the Disbursement Linked Financing Result (amounts Allocated to Disbursement expressed in SDR) each Linked Disbursement Linked Result Category Category Indicator (DLR) (expressed in (DLI)l SDR) 1. First DLI: DLR#1.2.1: Consultant has 3,250,000 upon 14,115,619.50 VAT signed a contract providing the achievement of DLR Implementation NBR with Program 1.2.1 on track management services DLR#1.2.2*: VAT registration 5,760,000 upon set-up by Year 2 (FY 2017-18) achievement of DLR 1.2.2 DLR#1.2.3*: VAT IT 4,480,000 upon collection system set-up by achievement of DLR Year 3 (FY 2017-18) 1.2.3 DLR#1.2.4: 25% of VAT 625,619.50 upon refunds system set-up by Year achievement of DLR 6 (FY 2020-21) 1.2.4 Formula: Subject to the Minimum Target achieved, FY Allocated Amount x [Actual Percentage Achievement/100 percent] less Amount disbursed previously under the relevant DLR for target met Provided that at least 40% of the work in respect of the individual DLR(s) are to be achieved before 'These DLIs are not time-bound. The Fiscal Years in which they are expected to be achieved as per this Schedule are strictly for indicative purposes. These DLIs can accordingly be met up and until the Closing Date, but in all cases subject to meeting the requirements set out in Section IV.B of Schedule 2 to this Agreement. * Scalable Ms. Fatema Yasmin -4- December 14, 2020 permitting partial disbursement under any individual DLR("Minimum Target")2 2. Second DLI: DLR#2.1: Baseline of active 960,000 upon 5,120,000 Number of registered VAT taxpayers for achievement of DLR# active VAT FY2015-16 established 2.1 taxpayers' ("Active Taxpayers Baseline") DLR#2.2*: 10 percent increase over the baseline by Year 2 (FY 960,000 upon 2017-18) achievement of DLR# 2.2 DLR#2.3*: 20 percent increase 1,600,000 upon over the baseline by Year 3 (FY achievement of DLR# 2018-19) 2.3 DLR#2.4*: 30 percent increase over the baseline by Year 4 (FY 1,600,000 upon 2019-20) achievement of DLR# 2.4 Formula- FY Allocated Amountx [Actual Achievement up to the relevant scalable DLR- Baseline]/[Target of the relevant scalable DLR - Baseline]+ undisbursed amount from previous targets met. 3. Third DLI: DLR#3.1*: 30% of large 1,600,000 upon 3,200,000 Percentage of taxpayers by Year 2 (FY 2017- achievement of DLR# large taxpayers 18) 3.1 as defined by the NBR,4 DLR#3.2*: 60% of large 1,600,000 upon submitting on- taxpayers by Year 3 (FY 2018- achievement of DLR# line returns and 19) 3.2 tax payments Formula: 53,333.33 for each percentage .__ The percentage completion will be determined by the number of pre-agreed items between the IT vendor and the NBR for implementation of the system as a proportion of the total number of items for each [DLR] which will be reported by the NBR. ' Active Taxpayer being a registered taxpayer who over the last year (12 consecutive months) has either filed VAT return or paid at least once. 4 "Large taxpayer list" is defined by a Committee of the NBR each year. Ms. Fatema Yasmin -5- December 14, 2020 increase in large taxpayers submitting on-line tax returns and tax payments 4. Fourth DLI: Combined with N.A N.A the third DLI 5. Fifth DLI: DLR#5.1: NBR public 1,220,000 upon 3,140,000 Greater disclosure of monthly VAT achievement of DLR# transparency of collection and refunds over a 5.1 the tax period of 12 consecutive administration months. by Year 2 (FY 2017- 18) DLR#5.2: VAT satisfaction survey carried out and results 960,000 upon published on the NBR website achievement of DLR# by Year 3 (FY 2018-19) 5.2 DLR#5.3*: In-house legal unit of NBR to respond to VAT appeals within 6 months on 960,000 upon average by Year 4 (FY 2019- achievement of DLR# 20) 5.3 Formula: Subject to the Minimum Target achieved, FY Allocated Amount x [Actual Percentage Achievement/100 percentl less Amount already disbursed under this DLR for target met. Provided that at least 40% of the DLR 5.3 is to be achieved before permitting partial disbursement ("Minimum Target") Ms. Fatema Yasmin -6- December 14, 2020 6. Sixth DLI: DLR#6.1: At least 25% of 650,000 upon 3,266,930 Greater Program's competitive bidding achievement of DLR# transparency of contracts granted during the 6.1 the tax First Fiscal Year has been administration carried out through electronic government procurement ("e- GP"); During the First Fiscal Year, a fund utilization report has been submitted by the NBR to the Finance Division on a quarterly basis DLR#6.2: At least 50% of Program's competitive bidding 650,000 upon contracts granted during the achievement of DLR# First Fiscal Year has been 6.2 carried out through electronic government procurement ("e- GP"); During the First Fiscal Year, a fund utilization report has been submitted by the NBR to the Finance Division on a quarterly basis; Audit observations considered significant have been resolved in a satisfactory manner within 6 months from the reception of annual audits reports DLR#6.3: At least 65% of NCB contracts are done through e-GP; All significant 650,000 upon audit objections resolved in 6 achievement of DLR# months; Submit quarterly fund 6.3 utilization report to FD & Ms. Fatema Yasmin -7- December 14, 2020 complete fund release processes after each quarter DLR#6.4: At least 70% of NCB contracts are done 650,000 upon through e-GP; All significant achievement of DLR# audit objections resolved in 6 6.4 months; Submit quarterly fund utilization report to FD & complete fund release processes after each quarter DLR#6.5: At least 75% of NCB contracts are done 666,930 upon through e-GP; All significant achievement of DLR# audit objections resolved in 6 6.5 months; Submit quarterly fund utilization report to FD & complete fund release processes after each quarter 7. Refinancing of 23 ,070 Preparation Advance Cancellation as on November 17, 2020 9,934,380.50 TOTAL 38,800,000 AMOUNT Ms. Fatema Yasmin -8- December 14, 2020 ANNEX2 PROGRAM ACTION PLAN Technical Actions 1. By no later than June 30, 2016, the Recipient shall establish the Active Registered Baseline referred to in DLR#2.1, the On-line Filing Baseline referred to in DLR#3.1 and the LTU Baseline referred to in DLR#4.1 of the table set forth in Section IV.A.2 of Schedule 2 to the Financing Agreement in substance and manner acceptable to the Association. 2. The Recipient shall carry out, under terms of reference acceptable to the Association, the following independent taxpayer satisfaction surveys: (a) 2014 survey by no later than June 30, 2016; (b) 2016 survey by no later than June 30, 2017; and (c) 2018 survey by no later than March 30, 2021. Fiduciary Actions 3. By no later than twelve (12) months after the Effective Date, the Recipient shall install, and thereafter maintain throughout the implementation of the Program, a fixed asset tracking software in the VAT Wing in order to record, track and manage assets procured under the Program, including the provision of training to VAT Wing staff in the use of such software. 4. By no later than one (1) month after the Effective Date, the Recipient shall form, and thereafter maintain throughout the implementation of the Program, a seven member team evaluation committee, under terms of reference acceptable to the Association, responsible for high value (i.e. more than US$2 million) information technology procurements under the Program; such committee to be composed by at least one national expert and two (2) international experts under terms of reference acceptable to the Association. 5. By no later than six (6) months after the Effective Date, the Recipient shall report, and thereafter continue reporting throughout the implementation of the Program, on key procurement indicators agreed with the Association using the Recipient's procurement monitoring systems acceptable to the Association. 6. By no later than three (3) months after the Effective Date, the Recipient shall: (a) appoint under terms of reference acceptable to the Association, and thereafter maintain throughout the implementation of the Program, a focal point within the ERD responsible for, inter alia, coordinating, monitoring and supporting the resolution of any Program monitoring and fund release issues, including the handling of complaints and financial irregularities; and (b)(i) start collecting and compiling into formats agreed with the Association, and thereafter continue collecting and compiling throughout the implementation of the Program, all Program fraud and corruption complaints; and (ii) submit, throughout the implementation of of the Program, the aforementioned reports to the Association on a semi-annual basis. Environmental and Social Actions 7. By no later than September 30,2020, the Recipient shall: (a) carry out atraining on e-waste handling to IT NBR staff; and (b) start, and thereafter maintain throughout the implementation of the Program, proper record keeping of equipment purchase, reused and auctioned. 8. By June 30, 2015, the Recipient shall set up the NBR's contact center, under terms of reference acceptable to the Association, responsible for, inter alia, properly running a complaint mechanism; such mechanism shall be available on NBR's website.