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Lessons Learned from Bank’s Experience in Revenue Administration Reforms

Tuan Minh LePRMPS, World Bank

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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.

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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.

High Reward…High Risks

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Need sound diagnosis.

Need proper project implementation plan.

Build on comprehensive approach with proper regard to institutional capacity of revenue agencies.

High supervision quality.

Therefore, the Guiding Principles are:

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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.

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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.

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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.

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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.

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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.

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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.

Lessons Learned (2)