Lessons Learned from Bank’s Experience in Revenue Administration Reforms

1. Lessons Learned from Bank’s Experience in Revenue Administration Reforms Tuan Minh Le PRMPS, World Bank

2. Bank Assistance in Revenue Administration Reforms • Substantial World Bank’s commitments to reforming revenue administrations. • During 1990s, 120 loan operations with tax reform components. • During 1995-2005, over 200 operations with tax and/or customs components valued at approximately $7 billion.

3. High Reward…High Risks • Huge potential fiscal rewards, but highly risky… • One of the largest public sector institutions in country. • High expectations regarding immediate results. • High risk of corruption. • Vested interests. • High level of investment. • Establish change management challenging.

4. Therefore, the Guiding Principles are: • Need sound diagnosis. • Need proper project implementation plan. • Build on comprehensive approach with proper regard to institutional capacity of revenue agencies. • High supervision quality.

5. Key Challenges in Pre-project Diagnostics, Project Design, Implementation, and Supervision 1. Pre-project Diagnostics • Lacked substantive diagnosis. • Diagnosis ad-hoc and absent methodological framework.

6. 2. Measuring Performance: Design of Performance Indicators (PIs) • Integrated approach to establishing PIs critically important. Issues: • Missing PIs. • Significant use of qualitative information rather than quantitative indicators. • Less focal attention to critical indicators, spec.: • effectiveness: integrity, trader/taxpayer service, tax evasion. • efficiency: Revenue collection per tax or Customs staff; budget cost and wage cost of collection. • Missing baseline data.

7. 3. Project Design • Incomprehensive or isolated reform activities. • Proposed reform activities mismatched with level of funding. • Insufficient coordination with other donors. • Insufficient attention to coordination with other agencies (e.g., Tax-Customs, treasury). • Forgoing measures to tackle SME taxation. • Hurried preparation without proper analysis. • Unrealistic timeframe, and improper sequencing.

8. 4. Project Implementation and Supervision • Weak project management (by Bank and client government) and supervision in certain cases. • Lack of ownership, strong political commitment, and accountability. • Lack of change management strategy. • Inadequate coordination with other donors.

9. Lessons Learned • Pre-project diagnosis to be done thoroughly. =>> Jit Gill.2000.A Diagnostic Framework for Revenue Administration.http://siteresources.worldbank.org/INTTPA/Resources/DiagnosticFramework.pdf • Project design should • fit into strategic vision of administration. • be guided by good governance framework. • matched with Borrower’s implementation capacity.

10. Lessons Learned (2) • Standard set of performance indicators to be specified with tractable benchmarks. • Project implementation period and sequencing must be reasonable. • IT focused without proper sequencing prone to failure. • Supervision quality to be ensured. • Pilot approach (e.g., LTU) could be appropriate.