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PRESS RELEASE

World Bank is Helping Moldova Modernize Its Tax Administration System

June 6, 2016


Washington, June 6, 2016 - Today the World Bank’s Board of Executive Directors approved US$20 million in financing for the Tax Administration Modernization Project in Moldova (US$7.42 million IDA credit and US$12.58 million IBRD loan). The project will support the fundamental restructuring of the tax administration system, by implementing a centralized and unified tax system to improve revenue collection, tax compliance and taxpayer services.

In recent years, Moldova has made substantial progress in reducing the time needed for paying taxes: according to the 2016 Doing Business report, in Moldova it takes 185 hours to prepare, file and pay taxes (about 21 payments per year) compared with, on average, 234.3 hours in the Europe and Central Asia region (20.5 payments per year) and 175.4 hours in OECD countries (11.8 payments per year).

This reduction in the workload for taxpayers has been brought about by the introduction of the “e-declaration” system, an online payment for some taxes, and the reduction in the number of declarations. Tax revenue collections, however, have shown a less positive trend. Revenue collections as a share of GDP have declined three years in a row, reaching a five-year low in 2014 at 30.2 percent of GDP. Poor performance is in large part a consequence of structural and capacity constraints in tax administration.

Moreover, taxpayer services are complicated by a lack of transparency on rules and procedures. Taxpayers see tax administration as inefficient and corrupt. 46 percent of businesses and 40 percent of household respondents to a 2015 Transparency International survey reported that informal payments are frequently needed to solve problems with tax inspectorates and estimated the total amount of bribes paid to the tax inspectorate by businesses in 2012 at 32.4 million lei ($2.54m).

Stakeholders from the business community, interviewed as part of the project identification, complained of a lack of transparency on tax issues, lack of clear guidance on tax policy and procedures, lack of clarity on rules and procedures for audits and appeals, and limited access to information on the appeals process as key issues contributing to increased governance risks in tax administration in Moldova.

“Moldova’s goal is a modern, computerized tax service where everybody can see the rules and plays by them,” said Alexander Kremer, World Bank Country Manager for Moldova. “The result will be less hassle for the taxpayer and more tax collected for schools, medicines and roads.”

The Moldova State Tax Inspectorate will be the implementing agency for the project.

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Since Moldova joined the World Bank Group in 1992, over US$1 billion has been allocated to approximately 60 projects in the country. Currently, the World Bank portfolio includes 9 active projects with a total commitment of US$335.5 million. Areas of support include regulatory reform and business development, education, social assistance, e-governance, healthcare, agriculture, local roads, environment, and other.

The International Finance Corporation committed portfolio in Moldova is US$63.6 million (US$60.2 million outstanding). Portfolio composition is 83 percent loans and 17 percent equity and quasi-equity. The Multilateral Investment Guarantee Agency has provided guarantees totaling US$95 million. Both institutions are members of the World Bank Group.

Media Contacts
In Washington
Meriem Gray
Tel : +1 (202) 473-9277
mgray@worldbank.org
In Chisinau
Elena Prodan
Tel : +373 22 262 262
eprodan@worldbank.org

PRESS RELEASE NO:
2016/ECA/155

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